Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 10/10” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
The S&P 500 index logged a four-day losing streak amid fears of rising interest rates. The 10-year Treasury yield pulled back slightly on registering an intraday high of 3.26%, but still hovering around its 7-year highs. Opening lower following an IMF (International Monetary Fund) warning that the ongoing trade tensions and rising interest rates could weigh down on the global economic growth, the index gained a positive momentum as yields stabilized on reaching new highs.
Struggling for direction and swinging between gains and losses, the index managed to hold on to the key support levels of 50 DMA and January 2018 highs for the third day in a row. The index closed the session at 2880.34, down 4.09 points and losing 0.14% over previous session’s close as weakness in Materials sector overshadowed gains in Energy and Technology sectors.
THE DETAILS (The “How & Why”):
Dampening investor sentiment at the open, the IMF lowered its global economic growth forecast for next year, citing intensifying trade tensions between the U.S. and China, coupled with the rising interest rate environment and emerging market crisis.
Treasury yields took a breather from its recent rally, pulling back slightly on registering new intraday highs, but still hovering near their 7-year highs. Technology stocks rebounded from their recent sharp losses, gaining 0.48%. Twitter Inc. and eBay Inc. were the top gainers within the sector, up 2.88% and 2.15%. Chip stocks, however, continued to decline on the back of analysts’ downgrade last week.
Energy stocks also supported gains, rising 0.99% alongside a rise in oil prices. Utilities, Real Estate and Health Care were the other modest gainers as Treasury sell-off eased, up 0.42%, 0.38% and 0.24% respectively.
On the other hand, a major sell-off in Materials sector dragged the index lower. PPG Industries Inc. fell to its 2-year lows on lowering its third and fourth quarter profit guidance, citing rising raw material costs and falling demand in China due to the ongoing trade friction between the U.S. and China. The paint and coating maker plummeted 10.06%, hurting investor sentiment and sending the sector broadly lower. Packaging Corp. of America and WestRock Co. were the other worst decliners of the session, down 8.13% and 7.90% respectively.
Concerns of rising raw material costs and soaring oil prices hurt Industrial stocks to be the next worst underperformer of the session, down 1.51%. American Airlines Group Inc. and Alaska Air Group extended their slide by 6.55% and 4.13%. Consumer Discretionary and Consumer Staples were the other notable decliners of the session, down 0.23% and 0.19% respectively.