Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 03/28” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
Resuming its slide, the S&P 500 index fell back below the closely watched key technical level of 2800 as nervous investors continued piling up on Treasury bonds amid growing signs of an impending global economic recession, sending yields to its lowest levels since 2017.
Struggling for direction during the early trading hours, the index fell sharply alongside a broad-based sell-off. Bouncing off the day’s low of 2787.72, the index trimmed losses to close off of session lows at 2805.37, down 2805.37, down 13.09 points and losing 0.46% over previous session’s close. Except Industrials, all the other ten primary sectors traded lower with Health Care and Energy sectors leading the declines.
THE DETAILS (The “How & Why”):
Health Care, Energy and Utilities were the biggest laggards in today’s choppy session, closing the choppy session lower by 0.81%, 0.70% and 0.67%, respectively. Centene Corp. was the worst decliner of the session, falling 4.98% after announcing its plan to buy WellCare Health Plan Inc. for $17.3 billion. While WellCare Health Plan Inc. surged 12.34% on this news, other health Insurance companies were broadly lower after the Department of Justice decided that the Affordable Care Act, also known as the Obamacare is unconstitutional.
Energy stocks remained under pressure as oil prices fell after the EIA (Energy Information Administration) reported an unexpected increase in US. Crude supplies for the first time in 3 weeks. Apache Corp., National Oilwell Varco Inc. and Noble Energy Inc. all fell more than 1.5% each.
Semiconductor stocks led the technology space lower after a German chip maker company Infineon technologies slashed its sales growth guidance for 2019, citing slowing chip demand especially in China. Microchip Technology, Advanced Micro Devices Inc. and Salesforce.com Inc. were the worst decliners within the Technology sector, falling 3.42%, 3.11% and 2.69%, respectively. Except Apple Inc. that rose 0.90%, all the other FAANG members traded lower.
Utilities, Communication Services and Consumer Staples sectors were the other notable decliners, down 0.67%, 0.54% and 0.40%. Banks and Financials stocks continued to be punished alongside sliding years and further inversion of the yield curve between 3-month and 10-year Treasury notes. The 10-year Treasury yield hit its lowest level since 2017, settling at 2.381%.
Demand for safety-haven Treasuries keep pushing yields lower amid signs of global economic slowdown, which were further fueled by comments from Stephen Moore, who is expected to be nominated to the Federal Reserve Board by President Trump, that he would prefer the central bank to cut rates by almost half a percentage point.
On the positive side, limiting losses were homebuilder stocks that received a boost from strong earnings posted by Lennar Corp and KB Home. Meanwhile, Boeing Inc. jumped 1.03% after the beleaguered aircraft maker hinted that the software fix, cockpit alerts and additional pilot training could improve safety of its 737 Max planes. Other airline stocks also boosted the broader Industrials space, helping it to buck the day’s declines to close slightly higher by 0.10%. American Airlines Group Inc., Alaska Air Group Inc. and Southwest Airlines Co, all rose more than 2% each.