Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Friday, 05/24” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
Intensifying concerns that the prolonged U.S. – China trade war could go on long enough to push the global economy into recession rattled investor confidence which were further compounded following a sluggish batch of U.S. economic data. Brutal sell-off in energy stocks alongside a plunge in oil prices sent the S&P 500 index tumbling to a one-week low with almost half of the index components now trading in a bear market territory.
Gapping significantly lower, the index maintained a steady stream of declines for most part of the session. Paring some of the losses during the final hour of trading, the index closed off of session lows at 2822.24, down 34.03 points and losing 1.19% over previous session’s close. Except Utilities and Real Estate, all the other sectors were sharply lower in today’s broad-based selling.
THE DETAILS (The “How & Why”):
Oil prices logged their worst decline this year, plunging more than 5% as demand concerns outweighed worries of a global supply glut. Energy sector was the biggest drag on the index for the second session in a row, down 3.13%. Hess Corp., Devon Energy Corp., Noble Energy Inc., Cimarex Energy Co., Concho Resources Inc. and Apache Corp., all fell more than 6% each.
With the U.S. – China trade talks stalled for now, sectors vulnerable to trade tensions continue to remain under pressure. On the economic data front, in a sign of slowing economic growth, the IHS Markit’s PMI data indicated that manufacturing activity grew at its slowest pace since September 2009. Nervous investors piled up safe-haven bond assets, sending the 10-year Treasury yield to 2.13%, its lowest level since October 2017.
Technology, Industrials and Materials all extended declines, closed sharply lower by 1.73%, 1.59% and 1.53%, respectively. Financials and Consumer Discretionary were the other major decliners of the session, down 1.49% and 1.34%. Best Buy Inc. fueled losses within retail and department chain stocks, falling 4.88% after the electronics retailer warned of rising prices due to tariffs.
Semiconductor stocks continue to drag the technology space lower in the wake of the Trump administration’s crackdown of Huawei Technologies Inc. Broadcom Inc., Advanced Micro Devices Inc. and NVIDIA Corp shed more than 3% each. NetApp Inc. tumbled 8.11% after the cloud data management specialist missed earnings estimates and offered soft guidance.
On the bright side, getting a lift from falling yields, defensive sectors Utilities and Real Estate capped today’s broad-based weakness, closing modestly higher by 0.82% and 0.51%. Meanwhile, L Brands Inc., Copart Inc. and Medtronic PLC soared 12.84%, 7.95% and 3.24% after beating earnings expectations.