Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 01/03” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
Following the worst trading year since Financial Crisis of 2008 and the worst December since the Great Depression, S&P 500 index opened the new trading year on a bearish note with several issues including the unresolved U.S. – China trade tensions, political drama in the White House, fears of a global economic recession, coupled with fears of a policy mistake by the Federal Reserve still weighing down on investor sentiment.
Downbeat economic data out of China reinforced fears of a slowing global economy, sending the index significantly lower at the open. A sharp rally in oil prices, however, helped erase early session loses. While Financials and Communication Services sectors also supported the day’s gains, a sharp sell-off in defensive sectors capped these gains to end yet another volatile session at 2510.03, up only 3.18 points and gaining a slight 0.13% over previous session’s close.
THE DETAILS (The “How & Why”):
Weaker-than-expected PMI (Purchasing Managers’ Index) data out of China and the euro zone indicated a contraction in the manufacturing activity, confirming expectations of a slowing global economy and dampening confidence at the open. A solid rebound in oil prices, however, helped erase early session losses.
Oil prices rallied 2.5% following a wild price action on reports of a big drop in Saudi Arabia’s oil exports in the month of December. Energy sector was the strongest performer of the session, up 1.83%, led by a 5.35% and 5.28% gain in EQT Corporation and Cabot Oil & Gas Corporation, respectively.
Amazon Inc. rose 2.47%, overtaking Apple Inc.’s market capitalization to become the second-largest American company by valuation on news that the e-Commerce giant plans to increase the number of its Whole Food stores in an attempt to broaden its empire.
The broader Consumer Discretionary sector closed the session higher by 0.93%. Wynn Resorts Ltd was the top gainer within the sector, rising 5.55% following strong revenue figures out of China’s only legalized gaming region Macau, to which the gaming company has largest exposure to, boosting other casino stocks alongside.
Communication Services, Financials and Materials were the other strong performing sectors of the session, up 1.25%, 0.74% and 0.45% respectively. Arconic Inc. and General Electric Co. were the best performers of the session, leading the broader Industrials sector higher by 0.45%.
Partially offsetting some of these day’s gains were sell-offs in defensive sectors. Real Estate was the worst performing sector of the choppy session, down sharply by 2.28% with all of its components trading lower for the day. Utilities, Health Care and Consumer Staples were the other sectors capping the gains and closing the session lower by 1.77%, 1.35% and 0.42% respectively.
In an unprecedented move, Apple Inc. slashed its quarterly sales forecast for the first time in 15 years citing cooling of iPhone demand in China, sending its stock lower by more than 7% in aftermarket trading hours and weighing down on its suppliers. S&P 500 futures fell 1.5% following a guidance cut by the iPhone maker on concerns of softening demand across the Technology sector.