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For the Results of the morning’s Trading Plans, please click here.
THE GIST (“THE WHAT”)
Holding steady ahead of the keenly awaited Fed monetary policy decision, the S&P 500 index took a sharp leg lower after the Fed announced the widely-expected quarter basis point rate cut but dampened expectations of further aggressive monetary easing.
Intense selling resumed after Fed Chairman Jerome Powell rejected the need of an aggressive monetary easing in the wake of the ongoing strength in economic data. Paring losses in the last hour of trading, the index closed off of session lows at 2980.38, down sharply by 32.80 points and losing 1.09% over previous session’s close. All of the eleven primary sectors closed lower with cyclical stocks performing the worst and Financials stocks posting the least declines.
THE DETAILS (The “How & Why”):
The Fed announced the widely-expected 25 basis rate cut for the first time since the financial crisis. However, expectations of further easing were lowered after Jerome Powell underscored the ongoing strength in the economy and cited a 25 basis rate cut as more of a ‘mid-cycle adjustment’ and an insurance against the looming trade uncertainty, subdued inflation and weakening global economy.
Tempered expectations of further rate cuts sparked an intense selling in cyclical stocks. Technology, Materials, Consumer Discretionary, Communication Services and Industrials all posted more than 1% decline. Consumer Staples were the biggest drag on the index, down 1.99%, led by 5.15% drop in Molson Coors Brewing Co. on disappointing quarterly results. Under Armour Inc. fueled the sell-off within the retail space, falling 4.19% on missing sales estimates.
Semiconductor stocks were the worst performers within the Technology space, led by a 10.10% plunge in Advanced Micro Devices Inc. after the chipmaker missed revenue and profit expectations. Micron Technology Inc., Western Digital Corp. and IPG Photonics Corp. were the other major drag on the space, all tumbling more than 4% apiece. Apple Inc., however, bucked the trend by jumping 2.04% on surpassing earnings estimates.
Treasury yields slipped following a less-dovish Fed announcement. While the 2-year Treasury yield edged slightly higher, the 10-year Treasury yield settled lower at 2.013%. The U.S. Dollar index hit a two-year high and gold prices plunged on the rate cut announcement, weighing down heavily on goldmining stocks. Freeport-McMoRan Inc. and Newmont Goldcorp fell more than 3% each.
On the other hand, a fall in yields helped limit losses within the defensive sectors. Banks and Financial stocks fared relatively better, down 0.43% after the central bank signaled that it might not cut the benchmark interest rate as aggressively as hoped.