Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 10/03” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
Lacking any major catalyst and weighed down by lingering U.S. – China trade policy uncertainties, the S&P 500 index extended its choppy and range-bound trading, closing the session flat at 2923.43, down by just 1.16 points. Opening lower mirroring the European sell-off, the index erased early session losses to register the day’s high at 2931.42, (A little over half a point away from piercing through our aggressive, intraday models’ upper bound level! Click here to read the full report) as defensive stocks gained strongly alongside a drop in Treasury yields after Federal Reserve Chairman Jerome Powell reiterated his opinion that he does not foresee a spike in inflation, despite historically low unemployment rates.
The index, however, pulled back in the last hour of the session, dragged lower by several retail stocks that fell sharply on rising cost concerns after Amazon Inc. announced a hike in its minimum wage for its workers to $15 per hour. Sectorial performance was mixed with weakness in Consumer Discretionary overshadowing strong gains in defensive sectors.
THE DETAILS (The “How & Why”):
Consumer Discretionary led the index lower with a 1.43% loss, weighed down by retail stocks that traded sharply lower on concerns of rising costs after Amazon Inc. announced a raise in its minimum wages for its employees to $15 per hour. While Amazon Inc. shed 1.65%, Foot Locker Inc., Gap Inc. and Macy’s Inc. were among the worst performers of the session, down 5.56%, 4.91% and 4.84% respectively.
Automakers also lagged the broader Consumer Discretionary sector after several major auto makers reported a sharp decline in their auto sales for the month of September, primarily due to rising interest rates and policy uncertainties around NAFTA. General Motors Company and Ford MTR Co shed 2.63% and 1.29%.
Real Estate sector was the other notable decliner of the session, down 0.28%. Edwards Lifesciences Corp. plummeted 5.10% on stock downgrade by Bank of America, leading the Health Care sector slightly lower by 0.09%. While semiconductor stocks were broadly higher on optimism after an analyst’s report advocated strength in Intel Inc.’s next-generation manufacturing technology, its rival Advanced Micro Devices Inc. tumbled 7.64%, dragging the broader Technology sector lower to close relatively unchanged.
On the other hand, supporting the day’s gains were Utilities and Consumer Staples, up 1.29% and 0.62% respectively alongside a fall in Treasury yields. The 10-year Treasury yield settled at 3.06% after Jerome Powell reiterated that he does not foresee a runaway inflation in the near future, despite indications of a tightening labor market.
Building on previous session’s gains, trade-sensitive Industrials and Materials also closed the session modestly higher by 0.45% and 0.19% respectively. Oil prices continue to hover near their 4-year highs, benefitting Energy stocks by 0.13%. Airline stocks, however, continue to remain under pressure on the back of soaring fuel prices.