Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Friday, 09/07” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
The S&P 500 index extended its slide as Technology stocks weakened for the third consecutive day. Energy stocks led the index lower alongside a sharp fall in oil prices on concerns of falling global demand. Trade tensions and weakness in emerging market currencies continue to weigh down investor confidence. While the U.S. and Canadian officials continue their trade talks to reach at an amicable NAFTA agreement, a fresh round of tariffs on $200 billion of Chinese goods go into effect today.
The index made small gains at the open following mixed economic data news, but was dragged lower on concerns of rising regulations on social media giants and falling demand for chip equipment. Finding support at 20 DMA, the index bounced off the day’s low at 2867.29 and closed off session lows at 2878.05, down 10.55 points and losing 0.37% over previous day’s close.
THE DETAILS (The “How & Why”):
Investors remain cautious amid the ongoing trade negotiations between the U.S. and Canada. Meanwhile, a new round of tariffs on an additional $200 billion worth of Chinese goods come into effect today with China threatening to retaliate with tariffs of its own.
Energy was the weakest performing sector, down 1.93% as oil prices fell on concerns of falling demand amid emerging market crisis, overshadowing a fall in U.S. crude inventories last week. Sell-off in Technology sector continued for the third session in a row, falling 0.81% as FANG stocks extended their previous session’s slide on rising regulatory concerns.
Semiconductor stocks were the weakest underperformer in today’s session. Micron Technology Inc., KLA-Tencor Corp. and Lam Research Corp. plunged 9.87%, 9.72% and 6.97% respectively following reports by Morgan Stanley highlighting worsening industry fundamentals with rising cost pressures and growing inventories. Further weighing down on the semiconductor stocks were negative comments by CFO of KLA-Tencor Corp, citing a softening of demand for chip equipment.
A sharp 8.92% decline in Wynn Resorts Ltd. on concerns of falling growth of their casino business dragged the broader Consumer Discretionary sector lower by 0.33%. Twitter Inc. fell another 5.87%, a day after its CEO Jack Dorsey’s congressional testimony regarding the social media giants’ roles in Russian meddling in 2016 U.S. elections and their misuse of user data.
Treasury yields edged lower following weaker-than-expected ADP employment data indicating that the private sector added 163,000 jobs, compared to the expected 190,000 jobs. Financial stocks were the other notable decliner, closing the session lower by 0.59%.
Falling yields, however, benefited dividend paying stocks. Telecommunications, Utilities and Real Estate sectors closed the session with decent gains of 0.73%, 0.39% and 0.34% respectively. Trade sensitive Industrials and Materials sectors were also higher by 0.33% and 0.18% as the dollar weakened following softer-than-expected private jobs data.