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THE GIST (“THE WHAT”)
The S&P 500 index recouped Monday’s losses following reports that Saudi Arabia has partially restored its oil production facilities that were damaged in a series of drone attacks on its key oil production facilities. Oil prices retreated sharply from Monday’s surge on expectations that the lost crude supply will be restored sooner than expected.
Treasury yields slipped ahead of the Fed’s key monetary policy decision tomorrow, boosting the demand for defensive stocks. Real Estate posted the biggest percentage gain, offsetting a sharp plunge in Energy stocks. Oscillating between small gains and losses for most part of the session, the index took a sharp leg higher during the last few minutes of trading to close near session highs at 3005.70, up 7.74 points and gaining 0.26% over previous session’s close.
THE DETAILS (The “How & Why”):
Oil prices pulled back more than 5% after skyrocketing 11% on Monday after Saudi Arabia’s energy minister announced that the damaged oil production facilities have been partially restored and that the lost oil supply is expected to be fully restored by the end of September.
Energy stocks gave back some of their strong gains of the previous session, leading the day’s declines by 1.52%. Apache Corp, Helmerich & Payne Inc. and Halliburton Co retreated sharply by 8.54%, 7.05% and 6.49%, respectively.
Meanwhile, Treasury yields slipped ahead of the highly-awaited key monetary policy decision by the Fed. Markets are broadly expecting a quarter basis point rate cut in the wake of fading global economic outlook, stubbornly low inflation and trade policy uncertainty. Defensive stocks received a boost, with Real Estate stocks posting the biggest percentage gain of 1.40%. Utilities and Consumer Staples were also modestly higher alongside falling yields.
While airlines and transportation stocks recouped some of their sharp losses, retail and departmental chain stocks extended their weakness into the second straight session. Nordstrom Inc., Hanesbrands Inc. and Macy’s Inc. slumped 9.76%, 5.12% and 4.54%, respectively. Corning Inc. was another major decliner of the session, falling 6.06% after the specialty glassmaker slashed its sales outlook for the year, citing weakening demand for its materials that are used in TV sets and optical-communication cables.