Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Fri, 07/27” will be posted Thursday, 07/26 night – please check back around 10:30pm/11pm EDT.
THE GIST (“THE WHAT”)
The S&P 500 index opened sharply lower after the disappointing quarterly result of closely watched Facebook Inc. dented investor confidence at the open. A dramatic $119 billion loss in market valuation of Facebook Inc. weighed down on the broader Technology sector, and proved to be the biggest drag on the index. Sectorial performance, however, remained mixed as the market continues to be flooded with strong earnings reports. Several companies rallied on solid earnings, limiting losses in the broader index.
Trading lower and swinging within a 10 point trading range, the index registered the day’s low at 2535.26 (less than one point away from the upper bound level indicated by our models for bullish consolidation. Click here to read the full report). With seven out of the eleven primary sectors ending the session with gains, the index closed near session lows at 2837.44, down 8.63 points and losing 0.30% over previous session’s close.
THE DETAILS (The “How & Why”):
Technology sector was the biggest drag on the index, down 1.64% led by a sharp 18.96% drop in Facebook. Weaker-than-estimated revenues and a disappointing daily active user growth led the social media giant to shed $119 billion in a biggest one day fall in valuation in the history of U.S. stock market. The company also reported weaker revenue growth guidance for the remaining quarters of this year.
On the other hand, limiting Technology sector loss was a 14.33% rise in Advanced Micro Devices Inc. on topping expectations. Qualcomm Inc. rose 7% after reporting better-than-expected quarterly earnings. Investors also welcomed the company’s announcement of dropping its plan to acquire NXP Semiconductors NV on failing to get approval from Chinese regulators.
Consumer Discretionary stocks added to the day’s losses, falling 0.50% weighed down by a 17.51% drop in Mohawk Industries Inc. Several retail companies including Macy’s Inc., Kohl’s Corp., Lowe’s Companies Inc. and Ralph Lauren Corp. traded lower in today’s session. Automakers such as General Motors Inc. and Ford Motor Co. extended their Wednesday’s weakness on concerns of rising costs of raw materials. Offsetting the losses were a solid 10.88% and 10.80% gains in D.R. Horton Inc. and Yum China Holdings Inc. respectively.
Health Care sector fell a slight 0.20% weighed down by a 10.18% fall in Biogen Inc. on disappointing test results of its Alzheimer’s drug. Financials sector closed the session lower by 0.12%. The 10-year Treasury yield settled unchanged at 2.97% as investors keenly await the second-quarter GDP report due Friday.
Nielsen Holdings PLC was the worst performer of the day, slumping 25.23% on missing revenue estimates coupled with a weaker future guidance. While the broader index traded lower primarily due to Facebook Inc.’s dramatic fall, sectors that rose on solid earnings reports were Utilities, Industrials, Materials and Consumer Staples, up 1.14%, 0.84%, 0.61% and 0.52% respectively. With oil prices rising for the third consecutive day after Saudi Arabia temporarily closed a shipping lane in the Red Sea accusing Iranian backed Houthi fighters that attacked two of its oil-tankers, Energy sector was higher by 0.99%
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