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THE GIST (“THE WHAT”)
Brutal selling extended into the second day of the fourth quarter, causing a major technical damage to the S&P 500 index. Weaker-than-expected private payrolls reading that followed a disappointing ISM manufacturing print fueled the mounting concerns of an impending recession in the wake of intensifying trade and political uncertainty.
Gapping sharply lower, the index maintained a steady stream of decline amid intense selling across sectors. A late-session rebound helped trim the day’s sharp losses, lifting the index to close off of session lows at 2887.61, down a whopping 52.64 points and losing 1.79% over previous session’s close. Except Real Estate, all the other primary sectors closed more than 1% lower in today’s intense broad-based selling.
THE DETAILS (The “How & Why”):
ADP’s private payroll data for the month of September indicated that the pace of hiring slowed down amid the tightening labor market conditions. Companies hired additional 135,000 employees as against the expected figure of 140,000 and down from 157,000 additional hiring in August. Contracting manufacturing activity, coupled with the slowing pace of hiring revealed that the persistent U.S. – China trade tensions might be seeping into the economy and pushing it towards recession.
Demand for safe-haven Government bonds spiked, sending yields to their three-week lows. The 10-year Treasury yield settled 5.7 basis points lower at 1.594%. Friday’s jobs data and private sector payroll data could provide more evidence of deepening economic slowdown.
Oil prices fell for the seventh straight session, hitting a 2-month low and erasing the entire rally that followed the devastating attacks in Saudi Arabia. A third straight weekly increase in U.S. crude supplies further weighed down on oil prices. Energy posted the worst declines of the session, down 2.61%. Except Cimarex Energy Co. that gained 0.82%, all the other components within this space were sharply lower for the day. Apache Corp., Devon Energy Corp and Marathon Oil Corp fell more than 4% apiece.
Financials were the next worst decliners alongside tumbling yields. Technology, retail, transportation, airlines, industrials, biotech were all broadly sold-off. Nektar Therapeutics, Macy’s Inc., Kohl’s Corp and American Airlines Group Inc. were the worst performers of the session, plunging more than 5% apiece. Apple Inc. led the FAANG components lower with a 2.51% decline.
Ten out of the eleven primary sectors settled lower by more than 1% each in today’s broad-based panic selling. Real Estate, however, fared relatively better alongside sliding yields, posting a modest 0.54% decline.
In the midst of the brutal selling, a handful of companies managed to buck the trend. Lennar Corp. was the top gainer of the session, gaining 3.77% on beating third-quarter earnings estimates. Paychex Inc. was another strong performer on the back of strong third-quarter earnings, climbing 1.78%.