THE GIST (“THE WHAT”)
The S&P 500 index extended losses following the release of stronger-than-expected economic data that indicated that while the economy is cooling down, inflation continues to remain sticky. Technology stocks were the biggest drag on the index as yields rose amid concerns that the Fed could keep rates higher for longer in the wake of a stagflation environment. The index tumbled at the open but managed to claw back some of the day’s losses to close off session lows at 4465.47, down 31.37 points (-0.7%) over the previous session.
Note: Our daily “S&P 500 Trading plan” will be posted around 9:30/10:00am EDT, every trading day.
Trading Plans for WED. 09/06 – Consolidation, Continued
For the last published Results of the Morning Trading Plans, please click here
THE DETAILS (The “How & Why”):
Treasury yields continued its uphill climb, with the 10-year treasury yield settling 2.8 basis point higher at 4.288% after the U.S. Aug ISM services index rose unexpectedly to a 6-month high of 54.5, as against the expected decline of 52.5. The data also indicated that while new orders are growing, businesses continue to pay higher prices for their inputs. Meanwhile, Boston Fed President Collins also hinted that the Fed would need to tread carefully and hold rates at these restrictive levels for some time despite signs of cooling inflation, since demand continues to outpace supply.
Interest-sensitive technology stocks were the biggest drag on the index alongside rising yields. Apple slipped 3.58% following reports that China, Apple’s biggest market, has banned officials at its central government agencies from using iPhones or any other foreign-branded devices in their offices. Nvidia also fell 3.05% on valuation concerns after Research Affiliates said that the AI beneficiary is “a textbook story of a Big Market Delusion”.
Regional bank stocks were other major decliners of the session led by a 4.04% drop in Comerica. Zion Bancorp and KeyCorp slipped more than 3% each. Airline stocks also traded lower after Southwest Airlines announced that surging fuel costs could hit its profit margin this year.
On the other hand, capping the day’s losses were gains in energy stocks as oil prices jumped higher to hit $90 mark as Saudi Arabia and Russia extend their 1.3 million barrel a day oil cut through December. Utility stocks also traded higher as investors bought into defensive stocks amid recessionary concerns.