Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 04/10” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
Ending its longest winning streak since October 2017, the S&P 500 index closed lower for the first time in nine days amid escalating trade tensions between the European Union and the U.S. Sentiment was further eroded after IMF slashed its global growth outlook for the third time in six months, reaffirming fears of a global economic meltdown.
Opening lower, the index maintained losses and whipsawed within a narrow range to close near session lows at 2878.20, down 17.57 points and losing 0.61% over previous session’s close. Losses were broad-based with nine out of the eleven primary sectors trading lower and Industrials and Energy sectors leading the declines.
THE DETAILS (The “How & Why”):
As the markets closely monitor developments around U.S. – China trade negotiations, the Trump administration escalated trade tension with the European Union after it threatened to levy tariffs on $11 billion worth of European goods in retaliation against European companies’ subsidies for aircraft manufacturer Airbus.
On economic data front, the number of job openings during the month of February fell by 538,000, registering the smallest number of job openings since March 2018 and suggesting a further tightening of labor market in the U.S.
Separately, the IMF slashed the global economic growth forecast for 2019 for the third time in six months from 3.5% in January to 3.3%, sending investors towards safe-haven bonds. Treasury yields edged lower amid growing concerns of economic slowdown and escalating trade tensions, hurting banking and financial stocks.
Industrials and Energy were the biggest drag on the index, closing sharply lower by 1.40% and 1.29%, respectively. Pentair PLC was the worst decliner within the Industrials space, tumbling 13.54% in its worst day in 14 years after the water solution company lowered its profit and sales guidance for full-fiscal year. Airline and trade-sensitive stocks including Deere & Co., Caterpillar Inc. and Grainger W W Inc. all fell by more than 3% on trade jitters. While Boeing Inc. shed another 1.46%, General Electric Co. fell 2.85% following stock downgrade by JP Morgan.
A broad-based sell-off within the Energy sector followed after oil prices pulled back from their 5-month highs on reports that Russia now plans to increase its crude production. Concho Resources Inc., Devon Energy Corp. and Noble Energy Inc. all fell more than 3% each.
Other sectors with notable declines were Consumer Discretionary, Materials and Technology, down 0.90%, 0.78% and 0.52%. Under Armour Inc., Advanced Micro Devices Inc. and MGM Resorts International were the worst performers of the session, falling 4.69%, 4.05% and 3.92%, respectively.
The only sectors to buck the trend were Utilities and Communication Services. While Utilities benefited from falling yields and closed 0.26% higher, Facebook Inc. capped losses within the Communication Services space, rising 1.51% on positive outlook by Morgan Stanley. Cerner Corp. was the top gainer of the session; soaring 10.30% after the health care information systems company announced a $1.2 billion buyback program.