Note: Our nightly “S&P 500 Outlook,Forecast, and Trading plan for WED 06/20” – please check back later (usually published between around 10:30pm EDT).
S&P 500 TODAY
THE GIST (“THE WHAT”)
Down for the fifth straight day, the S&P 500 index extended Monday’s sell-off as fears of a fully blown trade war between the world’s two largest economies intensified.
Finding support at the 20 DMA (now at 2751.05), the index bounced back from the day’s low at 2743.19 in the morning session. Our Intraday note published around 11:55am EDT alerted followers to the indication of the shift in the intrady price direction, calling the day’s low and advising intraday trading bias to be shifted from short selling to the long side, which proved to be accurate later throughout the session.
Trading lower in a tight range thereafter, the index closed the day near session highs at 2762.59, down 11.16 points and losing 0.40% over previous day’s close.
Trading lower in a tight range thereafter, the index closed the day near session highs at 2762.59, down 11.16 points and losing 0.40% over previous day’s close.
THE DETAILS (The “How & Why”):
Further escalating trade tensions with China, President Trump has now threatened to impose an additional set of import tariffs on Chinese goods worth $200 billion if China follows through with its retaliatory tariffs it announced late Friday. The market’s fear index, CBOE VIX spiked to a 10-day high at 14.68 in the early morning session, albeit pulling back in the afternoon to settle at 13.35.
With the fear index rising, investors flocked towards safe haven assets like bonds, sending the yields below their 100 DMA. The 10-year Treasury yield however stabilized during the afternoon session, settling at 2.896%, down a slight 2 basis points. While falling yields hurt Financials stocks to shed 0.34% for the day, the broader Real Estate sector gained a slight 0.09%.
Telecommunication stocks bounced back from Monday’s losses, gaining 1.42% and leading the day’s advances. Utilities, Consumer Staples and Health care sectors were also up for the day, limiting the losses in the broader index. On the other hand, Technology sector shed 0.72% led by several technology stocks that have a significant exposure to the Chinese market.
Industrials and Materials sectors continue to stay under pressure, leading the day’s declines as investors pulled back due to concerns of a fully blown trade war that could hurt margins of several multinational companies. These sectors were down 2.14% and 1.82%, respectively for the day. Energy sector also reversed Monday’s gains, losing 0.27% as investors weigh the impact of recent trade tensions on global oil demand ahead of the much awaited OPEC and Non-OPEC meeting in Vienna later this week.