Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Friday, 11/09” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
Pulling back from the previous session’s strong post-election relief rally, the S&P 500 index ended its three-day winning streak as investors turned their attention to FOMC policy statement release looking for clues on Federal Reserve’s monetary policy for the next year. Energy sector was the biggest drag on the index, falling sharply as oil prices fell into a bear market territory on the back of surging U.S. oil supply. FANG stocks weakness further weighed down on the index.
Opening lower, trading remained subdued as investors keenly awaited the FOMC policy statement release. The index took a sharp leg lower after the Fed left its benchmark rate unchanged, but trimmed losses in the last few minutes of the session, to close off of session lows at 2806.83, down 7.06 points and losing 0.25% over previous session’s close. The index, however, closed above the 200 DMA for the second day in a row as six out of the eleven primary sectors ended the session lower led by Energy and Communication Services.
THE DETAILS (The “How & Why”):
Energy stocks were broadly sold off as oil prices fell for the ninth straight session to fall into a bear market territory, after the Energy Information Administration (EIA) reported growing U.S. crude production and a seventh weekly increase in crude oil inventories. The sector was the biggest drag on the index, falling sharply by 2.20%, led by a 5.08% decline in Helmerich & Payne Inc.
Large cap FANG stocks reversed previous session’s gains, dragging the broader Technology and Communication Services sector lower by 0.20% and 0.93%. Facebook Inc. fell 2.42% on reports that the European regulators will investigate into the social media’s practice of targeting users for advertisements.
Qualcomm Inc. was the worst performing tech stock, tumbling 8.16% after it reported disappointing third quarter earnings and a weaker outlook, citing the ongoing legal dispute with Apple Inc. and falling demand in China. Limiting sector losses was a solid 5.90% rise in Microchip Technology Inc. The semiconductor reported record sales over $1 billion for the third quarter.
Among the other notable decliners were Materials, Industrials and Utilities sectors, down 0.54%, 0.25% and 0.27% respectively. Freeport-McMoRan Inc. was the worst performer within the Materials sector, declining 3.24% alongside a fall in copper prices on the back of a rebound in dollar index.
On the other hand, Financial sector was the only modest gainer of the session, up 0.32%, benefiting from rising yields as the Federal Reserve left its benchmark rate unchanged and hinted at maintaining its current pace of rate hikes despite the ongoing turmoil in the equity markets. While the 10-year Treasury yield settled at a four-week high at 3.235%, the short-term 2-year Treasury yield hit its highest level since June 2008, at 2.977%.
Holding on to slight gains were Consumer Discretionary, Consumer Staples and Health Care sectors, managing to close higher by only 0.04%, 0.02% and 0.02%, respectively, amid disappointing earnings released by several components in the tail-end of this earnings season. Perrigo Company, Wynn Resorts Ltd. and D.R. Horton Inc. were the worst decliners of the session, tumbling 16.32%, 13.13% and 8.97% respectively on missing earnings estimates.