Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 03/21” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
The S&P 500 index closed lower for the second straight day led by a dramatic sell-off in banking and financial stocks. Trade concerns were further stroked after President Trump commented that the tariffs on China could be maintained for a ‘substantial period of time’, further weighing down on the sentiment.
Trading lower for most part of the session, the index took a sharp leg higher to enter into a positive territory after the Federal Reserve maintained its accommodative stance and signaled at no more rate hikes for the remaining part of the year. Treasury yields, however slumped following the monetary-policy announcement, sparking a dramatic sell-off in Financials sector in the last hour of the session. The index closed off of session lows at 2824.23, down 8.34 points and losing 0.29% over previous session’s close.
THE DETAILS (The “How & Why”):
The latest monetary-policy statement released by the Federal Reserve reiterated its dovish stance and indicated that the central banks plans to end its massive $4.2 trillion balance sheet reduction by September. While reducing its GDP growth estimate for 2019 to 2.1% from 2.3%, it also signaled no more rate hikes this year amid signs of slowing economic growth. Treasury yields fell sharply, with the 10-year yield settling at its one year-low of 2.528%.
Rate-sensitive banking and financial stocks were sold-off across the board alongside tumbling yields. KeyCorp, Brighthouse Financial Inc. and Fifth Third Bancorp were among the worst decliners of the session, falling 5.33%, 5.23% and 4.89%, respectively. Goldman Sachs Group Inc., JPMorgan Chase & Co and Citigroup Inc. shed 3.38%, 2.13% and 2.09%, respectively.
Health Care and Industrials were the other sharp decliners, down 0.67% and 0.63%. While Nektar Therapeutics led the Health Care space lower with a 5.23% decline, Industrials were dragged lower by transportations and airline stocks alongside a surge in oil prices.
Oil prices rose above $60 for the first time since November and settled at a four-month high following a surprise decline in U.S. crude inventories. Energy sector, however, benefited from a rally in oil prices, closing modestly higher by 0.89%. Noble Energy Inc., Hess Corp, Devon Energy Corp and EOG Resources Inc., all registered more than 3% gain each.
FedEx Corp further weighed down on the Industrials space, falling 3.50% on missing quarterly earnings estimates. Consumer Staples and Technology sectors also added to the day’s declines, closing lower by 0.38% and 0.28%, respectively.
Offsetting some of these sharp declines was a solid 1.16% gain in Communication Services sector. Netflix Inc. and Twitter Inc. were among the top gainers of the session, jumping more than 4% each. Facebook Inc. and Alphabet Inc. also fueled gains within the sector, rising 2.40% and 1.99%. Real Estate, Utilities and Consumer Discretionary were the other modest gainers, closing the choppy session higher by 0.43%, 0.29% and 0.37%, respectively.
