Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 09/27” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
Opening on a positive note, the S&P 500 index held on to modest gains ahead of the keenly awaited FOMC policy decision. The gains were erased after the Federal Reserve increased the benchmark interest rate by 25 basis points and signaled one more rate hike in December. The index took a sharp leg lower in the last half hour of the session following Federal Reserve Chairman Jerome Powell’s news conference.
While a rate hike was highly anticipated, the yields fell after Jerome Powell indicated that he expects the inflation rate to remain slow and steady. Financial stocks were broadly sold-off during the last hour of the session to drag the index lower, closing near session lows at 2905.97, down 9.59 points and losing 0.33%.
THE DETAILS (The “How & Why”):
Treasury yields edged lower as investors digested the unexpected exclusion of the term ‘accommodative’ from FOMC’s policy statement, suggesting that the central bank might be turning aggressive with its monetary policies. Financial stocks fell sharply alongside a decline in yields after Jerome Powell said he does not expect a surprise rise in inflation. Closing the session lower by 1.27%, Financials sector was the worst performer in today’s session.
Interest-sensitive Real Estate and Utilities shed 1.15% and 1.04% with rising yields. Trade sensitive Materials and Industrials also extended their slide amid lingering trade tensions, down 1.03% and 0.15% respectively. Chip stocks continue to weigh on the broader Technology sector, to close the session lower by 0.41% after an analyst at Raymond James downgraded the industry citing cyclical concerns.
Further dragging the index lower were Energy stocks, down 0.99%. Oil prices took a breather from its recent strong rally which had taken the prices to their 4-year highs. A surprise increase in the U.S. crude oil inventories last week by 1.9 million barrels eased oil prices which had been soaring on concerns of tightening global supply concerns.
On the other hand, offsetting some of these sharp declines were modest gains in Telecom, Health Care and Consumer Discretionary sectors, up 0.36%, 0.20% and 0.20% respectively. Automakers and Retail stocks rebounded from previous session’s decline to provide much needed support to the Consumer Discretionary sector. Foot Locker Inc. was the top gainer within the sector, up 4.50%. Alexion Pharmaceuticals Inc. was the best performer in today’s session, rising 5.13% after announcing its plan to buy a clinical-stage biotechnology company for $1.2 billion.