Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Friday, 10/19” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
Disappointing earnings by Industrial heavyweights, coupled with the indications of a slowing Chinese economy dampened sentiments at the open. Stocks were sent tumbling in the afternoon session on concerns that a large global investor is coming under international scrutiny, following news that the Treasury Secretary Steven Mnuchin has dropped out of an investment conference in Saudi Arabia amid an international uproar over the Saudi royal family’s involvement in the disappearance of a prominent Washington Post columnist.
Yields reached multiyear highs once again, renewing fears of rising interest rates. With earnings season not proving to be a strong catalyst so far to catapult the index to break through strong resistance levels before regaining all-time highs, the price action continues to remain choppy and range bound amid concerns of trade war, rising yields and emerging market crisis simmering in the background.
Holding on to strong support at key technical level of 200 DMA, the index closed off of session lows at 2768.78, down sharply by 40.43 points and losing 1.44% over previous session’s close. Nine out of the ten primary sectors ended the session lower, with Consumer Discretionary and Technology sectors leading the declines once again.
THE DETAILS (The “How & Why”):
Technology stocks were once again beaten down in today’s risk-off session, falling sharply by 2.02%. Activision Blizzard Inc. led the sector’s declines, plunging 8.29% following disappointing sales of its recently launched multi-player game ‘Call of Duty: Black Ops 4’. Large-cap tech stocks were also sharp decliners amid renewed concerns of over-valuation as yields hit their multiyear highs once again. Limiting the losses, however, was a solid 5.51% rise in Alliance Data Systems Corporation on beating earnings estimates.
Consumer Discretionary sector was the worst decliner of the session, down 2.11%. Gap Inc. fell 5.79% after JPMorgan Chase downgraded the apparel giant, citing rising costs on the back of rising wages and tariffs, sending other retailers lower for the day. Homebuilder stocks fell sharply after Bank of America downgraded Toll Brothers, PulteGroup and NVR, citing a slowing market.
The broader sector was further dragged lower by Netflix Inc. and Amazon Inc. that fell 4.93% and 3.33% respectively, mirroring technology stocks. Limiting losses within the Consumer Discretionary sector were strong gains in auto parts makers and retailers that erased their previous session’s losses after Walmart Inc. and Advance Auto Parts Inc. announced that they are teaming up for a specialty online auto-parts store. Genuine Parts Company was the top gainer of the session, up 5.97% on reporting strong third quarterly results.
Communication Services, Industrials and Materials were other notable decliners of the session, down 1.84%, 1.79% and 1.14%, respectively. Disappointing quarterly earnings by United Rentals Inc., Textron Inc., and Snap-On Inc. hurt the industrials space and send these stocks tumbling by 15.04%, 11.25% and 9.61% respectively.
Financials stocks continued with their trend downwards, giving up 1.55% in today’s session. Treasury yields climbed to their multiyear highs once again but were pulled back in the afternoon session on the back of stock market weakness and amid a sell-off in Italian debt market. The 10-year Treasury yield settled at 3.181%, pulling down after hitting day’s high at 3.216%.
Energy, Health Care and Consumer Staples were the other laggards in the session, down 0.48%, 1.14% and 0.23% respectively. The only sectors supporting slight gains were Utilities and Real Estate, up slightly by 0.08% and 0.01% respectively.