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THE GIST (“THE WHAT”)
The S&P 500 index retreated from its record highs, closing the choppy session at 3005.67, down 15.9 points and losing 0.53% over previous session’s close after a less accommodative monetary policy decision by the ECB dampened expectations of an aggressive rate cut by the Fed this month end.
The latest batch of disappointing earnings by several blue-chip companies on the busiest day of this earnings season further weighed down on the index. Driven by a mixed bag of earnings, all of the eleven primary sectors traded lower with Energy sector leading the declines.
THE DETAILS (The “How & Why”):
The ECB (European Central Bank) left its benchmark interest rate unchanged for now, but signaled at further monetary easing over the coming months. While the ECB President Mario Draghi downplayed the risk of recession in the Eurozone, he underlined the significance of monetary stimulus to ensure that the financial situation in the Eurozone remains conducive for expansion.
A less-than-expected accommodative monetary policy decision by the ECB dampened expectations of an aggressive rate cut by the Federal Reserve next week. Stronger-than-expected economic data, coupled with less dovish comments by Mario Draghi pushed the 10-year Treasury yield higher to settle at 2.085%.
Disappointing earnings across sectors on this busiest day of earnings, however, kept the demand for equities subdued. Energy sector was the biggest laggard of the session, closing 1.16% lower. EQT Corp was the worst decliner within this space, tumbling 6.91% following bearish comments by an analyst. Cimarex Energy Co, Devon Energy Corp and Concho Resources Inc. were the other major decliners dragging the space lower, all falling more than 3% apiece.
Technology, Materials and Consumer Discretionary sectors were dragged lower by disappointing earnings from several blue-chip companies. Xilinx Inc., Paypal Holdings Inc. and Citrix Systems Inc. weighed down heavily on Technology space on missing earnings expectations, declining 3.44%, 5.09% and 5.61%, respectively. Chip stocks fell across the board after Xilinx Inc. guided lower amid U.S. – China trade uncertainty.
Except Netflix Inc., that jumped 2.68%, all the other FANG components traded lower for the day. While Facebook Inc. fell 1.93% after the social-media giant absorbed a $5 billion charge from government fines and warned of slowing demand over the second half of the fiscal year.
Align Technology Inc. was the worst decliner of the session, plummeting 26.99% after the orthodontic-device maker issued a surprisingly gloomy outlook due to the falling demand in the China. American Airlines Group Inc. and Ford Motor Co. dragged other airline and auto stocks lower, both falling 8.44% and 7.45%, respectively on missing earnings estimates.
On the bright side, Masco Corp., TechnipFMC PLC and LKQ Corp. surged 8.11%, 6.03% and 5.11% on beating earnings estimates. Bristol-Myers Squibb Co., Raytheon Co. and International Paper Co. were the strong performers of the choppy session, all gaining more than 4% each.