Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Friday, 08/31” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
Taking a breather from a historical rally that lifted it to record highs, the S&P 500 index pulled back after trade war concerns were revived following news that President Trump intends to back a fresh round of tariffs on Chinese goods valuing $200 billion next week.
Trading lower and swinging within a narrow range, the index took a sharp leg lower in the afternoon session, registering the day’s low at 2895.22 on prospects of new round of tariffs on China. The index closed off session lows at 2901.13, down 12.91 points and losing 0.44% on previous day’s close. Trade sensitive Materials and Industrials sectors led a broad-based sell-off, with 10 out of the 11 primary sectors ending the session lower.
THE DETAILS (The “How & Why”):
Materials sector led the declines, down 1.25% in its worst day in 2 weeks with several mining, mineral and chemical companies falling on trade war concerns. Dollar value edged up on the back of rising economic crisis in the emerging markets, further weighed down on metal prices across the board. Freeport-McMoRan Inc., Kansas City Southern and Newmont Mining Corp were the worst performers within the sector, losing 3.54%, 2.94% and 2.17% respectively. Trade sensitive Industrial sector was also broadly lower by 0.77%.
Demand for Treasury bonds rose as investors flocked to safe haven assets, pushing yields lower. Financials sector shed 0.79% alongside a fall in yields. Energy sector also closed the session lower by 0.32% in today’s broad-based sell-off, despite a rise in oil prices on tightening supply concerns.
Real Estate, Telecommunications and Consumer Staples were the other notable decliners, down 0.56%, 0.39% and 0.29% respectively. Dollar Tree Inc. and PVH Corp. were the worst performers in today’s session, falling sharply by 15.54% and 9.57% on reporting disappointing quarterly results, dragging the broader Consumer Discretionary sector lower by 0.61%.
While Technology stocks were broadly higher during the early session, stocks reversed gains as trade-war jitters kicked in the afternoon session. The sector closed the session lower by 0.29%, led by a sharp 9.79% decline in Electronic Arts Inc. Utilities sector was the only gainer, slightly up by 0.13% in today’s risk-off session.