Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 11/20” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Intense selling in Technology, Communication Services and Consumer Discretionary sectors led by the once beloved FAANG stocks dragged the S&P 500 index sharply lower to close below the psychologically important 2700 support level. Weaker-than-expected Home Builders’ confidence index that came in at the lowest level in more than two years also dampened sentiment at the opening of a holiday-shortened trading week.
Opening lower, the index maintained a bearish momentum for most part of the session amid a dramatic sell-off in tech stocks. Selling, however, stabilized in the last two hours of the trading as investors flocked towards the safety of defensive stocks. With nine out of the eleven primary sectors lower, the index closed near session lows at 2690.73, down sharply by 45.54 points and losing 1.66% over previous session’s close.
THE DETAILS (The “How & Why”):
Technology, Communication Services and Consumer Discretionary sectors were the worst performers of the session, down 3.79%, 2.59% and 2.71% respectively. A string of negative reports surrounding iPhones demand continues to keep Apple Inc. and its suppliers under intense pressure. Apple Inc. shed another 3.96% on reports that the tech-giant has planned another round of production cuts of the newly released iPhones, also sending the iPhone maker’s suppliers tumbling.
FAANG stocks fell broadly to form a ‘death cross’ (50 DMA crossing below 200 DMA in an indication of a bearish reversal), and officially entered into a bear market territory. Series of bad news around Facebook Inc.’s ongoing investigation about its efficiency in handling the Russian interference in 2016 U.S. elections led the social-media giant lower to hit a 20-month low. Alphabet, Amazon.com Inc. and Netflix Inc. also tumbled 3.82%, 5.09% and 5.45% respectively.
Concerns of falling global demand, coupled with the ongoing U.S. – China trade tensions continue to weigh down on multinational semiconductor stocks that rely heavily on Chinese markets. NVIDIA Corp. fueled the sell-off in chip stocks, plunging 12.00% on missing revenue and guidance estimates. Salesforce.com Inc., Adobe Inc. and Micron Technology Inc. were the other sharp decliners within the sector, down 8.71%, 8.04% and 6.62% respectively.
Industrials and Materials sectors were other sharp decliners of the session, down 1.57% and 1.40%. Copart Inc. and Boeing Co. led the broader Industrials space lower, falling 4.84% and 4.47% respectively. Energy stocks fared relatively better, down slightly by 0.10% alongside a choppy price action in oil prices. Oil prices settled slightly higher on hopes of production cuts by OPEC and its trading partners to curtail the global supply glut.
On the economic data front, a weaker-than-expected Home Builders’ confidence index spooked the anxious investors to pile up on safe-haven bonds, sending the Treasury yields lower and benefiting interest-sensitive defensive stocks. Utilities and Real Estate were the only two sectors with modest gains in today’s risk-off session, up 0.52% and 0.36% respectively.