Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 10/25” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
In a dramatic sell-off, the S&P 500 index plunged 3.09% as panicked investors fled to safe-haven assets amid growing concerns of slowing global economic growth and rising production costs that have started eating into corporate profits. Chipmakers Texas Instruments Incorporated and STMicroelectronics N.V. fueled these concerns after they warned of slowing demand. Mid-term election jitters, an aggressive Federal Reserve and geopolitical tensions further eroded sentiments.
A six-day losing streak took the index close to May 8, 2018 lows, leaving the index negative for the year and seven out of the eleven primary sectors into correction territory. While strong earnings by Boeing Company helped trim early session losses, the sell-off accelerated in the last hour of the session. With eight out of the eleven primary sectors sharply lower, the index closed near session lows at 2656.10, down sharply by 84.59 points and losing 3.09% over previous session’s close.
THE DETAILS (The “How & Why”):
Technology and Communication Services sectors were the most punished in today’s panic sell-off, falling broadly by 4.43% and 4.88% respectively. Disappointing earnings by Texas Instruments Incorporated and STMicroelectronics N.V. sparked a sell-off in semiconductor stocks after these chipmakers warned of slowing demand. NVIDIA Corp. and Advanced Micro Devices Inc. fell 9.79% and 9.17% leading the decline in semiconductors.
Dragging the broader Communication Services sector lower was 9.40% plunge in Netflix Inc., the worst performer within the FAANG stocks on reports that Apple Inc. plans to launch a new subscription television service that could give strong competition to Amazon and Netflix.
DXC Technology Co. was the worst decliner of the session, tumbling 16.34% on announcing a surprise exit of a top executive at its American office. Sending the Communication Services sector lower was a sharp 8.06% decline in AT&T Co. on missing earnings estimates. Verizon Communications Inc. was the only company to extend previous session’s gains, up 0.37% after reporting solid third quarter results.
Energy sector was the next big laggard, down 3.70% with all its components trading lower, despite a rebound in oil prices. Industrials and Materials also extended their slide, down 3.43% and 3.15% respectively, as companies continue to issue tepid earnings guidance citing rising manufacturing costs due to recent tariffs, strengthening dollar and falling global demand. While losses within the sector eased mid-day on the back of Boeing Company’s better-than-expected results, losses accelerated in the last hour of the session amid ongoing concerns.
Financials, Consumer Discretionary and Health Care sectors were the other decliners, down 2.69%, 3.31% and 3.29% respectively. Treasury yields edged lower amid increasing demand for safe haven assets like bonds, benefiting defensive stocks. Utilities, Real Estate and Consumer Staples rose for the second day in a row, up 2.30%, 1.13% and 0.49% respectively. DTE Energy Company was the best performer within the Consumer Staples space, rising 5.15% on topping earnings estimates.