Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Friday, 08/24” will be posted around 8:30am EDT, Friday.

THE GIST (“THE WHAT”)

The S&P 500 index extended losses for the second day in row as trade tensions took center stage once again after the U.S. and China slapped each other with tit-for-tat tariffs. Materials sector led the index lower as metal prices continued their trend downwards on the back of strengthening dollar. Further dragging the index lower were Energy stocks with oil prices ending their five day climb up.  
At the open, the S&P 500 index was lead higher by technology stocks to register the day’s high at 2868.78 (just under 2 points below the level indicated by our medium-term models to go long! Click here to read the full text). Gains were, however, reversed as trade tensions weighed down on the investors’ sentiment. Struggling for direction and trading mostly lower within a narrow range, the index closed slightly lower at 2856.98, down 4.84 points and losing 0.17% over previous day’s close. Ten out of the eleven sectors closed the session lower in today’s broad based sell-off.

THE DETAILS (The “How & Why”):

Trade tensions between the world’s largest economies intensified after a new round of 25% U.S. tariffs on Chinese goods (including semiconductors, chemicals, plastics, motorbikes and electric scooters) worth $16 billion came into effect today. China retaliated with tariffs on U.S. imports (including fuel, steel products, autos and medical equipment) worth the same amount. Several industrial and auto stocks fell on concerns of trade uncertainties. The ongoing political drama surrounding President Trump also weighed down on investors’ sentiment.
Materials sector was the worst performer in today’s session, losing 0.70%. The dollar edged up for the first time in six days following a hawkish stance by the Federal Reserve, sending metal prices lower across the board. Nucor Corp. and Freeport-McMoRan Inc. were the biggest drag on the sector, losing 2.77% and 2.41% respectively.
Oil prices took a breather from a five session climb, dragging the Energy sector lower by 0.52%. Airline stocks extended their slide, weighing down on the Industrials sector to end the session modestly lower by 0.37%. Hormel Foods Corp. led the Consumer Staples sector lower, losing 3.06% on missing earnings estimates.
Financial stocks were broadly lower by 0.51% on concerns of flattening yield curve. The spread between the 2-year and 10-year Treasury yields, an economic indicator, narrowed to reach its lowest since August 2007 suggesting an impending recession. Investors will be keenly looking forward to the Federal Reserve Chairman Jerome Powell’s speech after the central bank’s annual meeting in Jackson Hole, Wyoming tomorrow. While the market is not expecting any significant change in his hawkish stance, investors will be looking for clarity in the central bank’s monetary path amid growing trade and geopolitical risks.
Retail stocks continued their earnings season, with L Brands falling sharply by 13.05% on cutting its full-year guidance. The retailer was the worst performer within the index, dragging the broader Consumer Discretionary sector lower by 0.19%. Among the other decliners were Real Estate and Health Care that shed 0.21% and 0.10% respectively.
Technology was the only sector to limit the day’s losses, closing the session slightly higher by 0.18%. Advanced Micro Devices Inc. was the to
p gainers in the index, rising 6.65% after Rosenblatt Securities hiked the semiconductor’s price target by 11%. Synopsis Inc. was the other major gainer within the sector, up 6.36% on beating profit estimates.