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THE GIST (“THE WHAT”)
Signs of economic slowdown dampened confidence on the first day of the fourth quarter, sparking a brutal sell-off as anxious investors dumped growth stocks in favor of safe-haven bonds. Giving up the support of 50 DMA (now at 2947.94), the S&P 500 index tumbled alongside plunging Industrials, Materials and Financial stocks. Energy stocks fueled the declines with oil prices plunging amid dwindling global economic outlook.
Losses stabilized during the late-afternoon session, closing the wild session off of session lows at 2940.25, down sharply by 36.49 points and losing 1.23% over previous session’s close. All of the eleven primary sectors traded lower in today’s panic selling.
THE DETAILS (The “How & Why”):
Shrinking for the second straight month, the ISM manufacturing activity contracted to its lowest level since June 2009, underscoring the impact of lingering U.S. – China trade tensions. The World Trade Organization slashed its forecast for global trade growth to 1.2% from the previous estimate of 2.6%. Nervous investors gave up riskier assets in favor of safe-haven Government bonds, sending Treasury yields lower.
Trade dependent Industrials and Materials were the worst hit in today’s panic selling, broadly sold-off by 2.40% and 2.30%. Mining, transportation and airline stocks fell sharply on renewed concerns of decelerating global economic growth. Freeport-McMoRan Inc. led the miners lower, falling 4.18% alongside declining copper prices.
Plummeting yields dragged the Financials sector lower to register a sharp 2.08% decline. Losses within this space accelerated after Charles Schwab Corp. announced its plan to end its trading commissions on stocks, exchange-traded funds and options, sending its stock sinking by 9.73%.
Rival online brokers were also sent sharply lower on expectations that they might be forced to mimic this move to stay competitive. E*TRADE Financial Corp. was the worst performer of the session, plunging 16.43%. Bank of America Corp, Comerica Inc., Goldman Sachs Group Inc. and Morgan Stanley fell more than 2% apiece.
Recession fears also pushed oil prices lower amid worries of slowing energy demand. Energy stocks were among the other major decliners of the session. Cimarex Energy Co, Apache Corp and Concho Resources Inc. led the space lower, posting more than 5% decline apiece.
Meanwhile, defensive stocks fared relatively better in today’s broad-based selling. Among individual strong movers, McCormick & Co. soared 6.81% on beating third-quarter earnings estimates. Ulta Beauty Inc. also jumped 6.21% following reports that the company’s director purchased $87 million worth of shares in a series of recent transactions.