Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 09/26” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
With investors maintaining a cautious stand ahead of the keenly awaited Federal Reserve’s monetary policy decision on Wednesday, the S&P 500 index remained directionless, swinging between small gains and losses amid several political and trade risks.
Opening with slight gains, the index took a sharp leg lower alongside President Trump’s speech at the United Nations General Assembly, wherein he reiterated his policy position against China and his hardline position against Iran. Trading within a narrow range and successfully testing the August 29 highs for the second day in a row, the index closed near session lows at 2915.56, down 3.81 points and losing a slight 0.13% over previous session. Consumer Discretionary and Energy were the only sectors supporting gains while the remaining sectors were mostly sold off.
Today’s price action tested the lower bound of our intraday model’s pivot trading band, bouncing off just 0.30 point below it and closing less than 2 points above this level! Click here to verify this claim.
THE DETAILS (The “How & Why”):
Yield sensitive defensive sectors extended their slide to lead the day’s declines for the second day in a row. Yields inched up ahead of the keenly awaited Federal Reserve’s policy meeting results with the expectation of a quarter-point rate hike. The 10-year Treasury yield settled near its May 2017 high at 3.098%. Utilities, Consumer Staples and Health Care shed another 1.22%, 0.73% and 0.28% respectively. Financials sector was also broadly sold-off, closing the session modestly lower by 0.38% on concerns of a flattening yield curve.
Trade sensitive Materials and Industrials continued their slide, down 0.47% and 0.33% with trade war concerns back to the fore following President Trump’s comments at the United Nations General Assembly which stroked the trade war fears. Chip stocks dragged the broader Technology sector slightly lower by 0.04% after an analyst at Raymond James downgraded the industry citing cyclical concerns. Microchip Technology Inc. was the worst decliner within the sector, down 4.29%.
On the other hand, Consumer Discretionary and Energy stocks offset some of these strong declines, gaining 0.59% and 0.57%. While several retail stocks and auto stocks weighed down on the broader Consumer Discretionary sector, the sector closed the session with a modest 0.59% gain, led by a 2.48% and 2.08% gain in D.R. Horton Inc. and Amazon Inc. respectively.
Oil prices continued their trend upward, riding high on the back of tightening global supplies concern after the OPEC and other major oil producers left the output quotas unchanged. While the Energy sector gained 0.57%, airline stocks continue to be battered due to soaring oil prices. American Airlines Group Inc., Alaska Air Group Inc. and Delta Air Lines Inc. shed 2.79%, 1.69% and 0.54%. CenturyLink Inc. was the worst performer of the session, tumbling 8.08% after its Chief Financial Officer announced his surprise departure to join a rival telecom player.