Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
For the Outlook, Forecast, and Trading Plans published this morning, please click here
For the last published Results of the Morning Trading Plans, please click here.
THE GIST (“THE WHAT”)
Conflicting messages around the U.S. – China trade talks raised doubts on the progress towards a potential trade deal, dampening previous session’s optimism and erasing early session gains within the S&P500 index. Risk aversion increased demand for safe-haven assets like bonds and gold, pushing the closely-watched yield curve further into negative territory and accelerating losses within the index.
Building on overnight gains, the index opened higher but gains lost steam and losses accelerated alongside inverting yield curve between the 2-year and 10-year Treasury notes. Flipping between gains and losses, the index closed off of session lows at 2869.16, down 9.22 points and losing 0.32% over previous session’s close. Eight out of the eleven primary sectors traded lower, with Financials and Energy sectors leading the declines.
THE DETAILS (The “How & Why”):
Chinese officials dismissed President Trump’s claim that Beijing wanted to restart trade talks, casting doubts on the progress towards a potential trade deal. Conflicting comments around trade talks kept investors on the edge and dampened hopes of a possible resolution of the prolonged U.S. – China trade war.
Meanwhile, China continued to weaken its currency for the ninth straight session, pushing it to a near 11-year low, despite Trump administration accusing China of manipulating its currency and gaining advantage in the trade war. Demand for safe-haven traditional assets like Government bonds and gold gained steam.
Treasury yields resumed their slide, falling near all-time lows across the board. The 10-year Treasury yield hit its lowest level since July 2016 at 1.493% and deepened the yield inversion between the 2-year and 10-year Treasury notes further into negative territory. Losses accelerated mid-session alongside sliding yields with banking and financial stocks worst hit. Bank of America Corp, Comerica Inc, Citigroup Inc, Capital One Financial Corp, JP Morgan Chase & Co and M&T Bank Corp all shed more than 1% apiece.
Oil prices snapped a four-day losing streak, jumping higher on expectations of a drawdown in domestic crude inventories. Energy stocks, however, were major losers in today’s session on concerns of a global economic meltdown. Valero Energy Corp led the sector declines with a 2.71% loss. Cimarex Energy Co, Pioneer Natural Resources, Marathon Petroleum Corp and Hollyfrontier Corp all fell more than 1.5% apiece.
Sharp losses within pharma and drug maker stocks weighed down heavily on Health Care space. Amerisourcebergen Corp, Humana Inc. and Mckesson Corp were the worst decliners within this space, plunging more than 5% apiece.
Among individual strong movers, J.M. Smucker Co. posted the worst decline of the session, falling 8.18% on missing earnings estimates. Philip Morris International Inc. was the next worst performer of the session, losing 7.76% on confirming that it is in talks to merge with another tobacco giant Altria Group.