Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
For the Outlook, Forecast, and Trading Plans published this morning, please click here
For the last published Results of the Morning Trading Plans, please click here.
THE GIST (“THE WHAT”)
Fears of global recession sparked by benchmark interest rate cuts by several central banks rattled investors across the globe and fueled the demand for traditional safe haven assets. Demand U.S. Government bonds skyrocketed, sending Treasury yields plunging across the board to their multi-year lows and inverting the yield curve further into negative territory.
The S&P 500 index plunged at the open but staged a remarkable rebound as yields stabilized and the Chinese yuan rose against the U.S. Dollar, bouncing off the day’s low of 2825.71 and erasing day’s sharp losses to close in a positive territory at 2883.98, up 2.21 points over previous session’s close. Financials were the biggest drag on the index, but dividend-paying interest-sensitive stocks provided the much needed support, lifting the index higher amid sliding yields.
THE DETAILS (The “How & Why”):
Overnight, the central banks of New Zealand, India and Thailand cut their domestic benchmark interest rates, sparking global investor panic amid growing concerns of recession. Banking and financial stocks were sent tumbling alongside plunging yields, posting the worst declines of the session of 1.21%.
The 10-year Treasury yield stabilized after briefly hitting its 2016 low at 1.6% to settle at 1.71%. Charles Schwab Corp, Wells Fargo & Co, Comerica Inc., JPMorgan Chase & Co were all sharply lower by more than 2% apiece as the yield curve between the short and long term yields fell further into negative territory.
Oil prices also fell further into the bear market territory following a surprise weekly jump in supplies of U.S. domestic crude inventories by 2.4 million barrels. Energy stocks were the other major decliner of today’s wild session, closing 0.76% lower. Apache Corp, National Oilwell Varco Inc. and Occidental Petroleum Corp were the worst performers within this space, falling 4.06%, 3.38% and 3.32%, respectively.
Communication Services and Industrials also added to the day’s weakness. On the other hand, flight towards safety assets pushed silver and gold prices sharply higher, boosting metal and mining stocks. Materials sector outperformed the index, closing with a gain of 1.32%, led by a 3.58% jump in Newmont Goldcorp Corp.
With yields plunging to their multi-year lows, dividend-paying defensive sectors received a major boost. Consumer Staples and Real Estate were sharply higher by 1.16% and 0.93%, respectively in today’s wild price action. Meanwhile, investors continued to buy back the beaten-down Technology stocks, lifting the space modestly higher by 0.64% for the second session in a row. FleetCor Technologies Inc. was the top gainer of the session, soaring 8.20% on beating earnings estimates.