S&P 500
THE GIST (The “What”):
The index opened Tuesday’s session sharply lower as Italy’s political chaos threatened a global slow down. The broad based sell-off slowed down during the afternoon session and attempted to reverse, reaching the day’s high at 2710.67 (close to the 100 DMA now at 2710.63) following the release of Consumer Confidence data that indicated a stable economy. Losses however accelerated as trade war concerns were back on the news headlines. The index fell sharply below its 100 DMA, registering the day’s low at 2676.81 (just 3 points above 50 DMA) causing a major technical damage to the index. Led by the Financials sector, the index closed the session 31.47 points lower at 2689.86, losing 1.16%. The last time it closed below 100 DMA (now at 2710.63) was on May 9 2018.
THE DETAILS (The “How & Why”):
Financial sector was the worst hit as investors, fearing a possible debt crisis flocked to safe haven assets like Treasuries, bringing down yields. The 10-year Treasury yield fell 15 basis points to settle at 2.78%. Losses in this sector were further exaggerated after a wealth management executive at Morgan Stanley cited slowing business and rising interest expenses.
Financials, Industrials and Materials sectors were the worst hit, losing 3.37%, 1.63% and 1.77% respectively. Energy sector extended its last week’s losses as oil prices continue their trend downwards. Falling yields however benefited Real Estate stocks which had been under pressure last week due to rising mortgage rates. Real Estate and Utilities were the only two sectors ending the day higher, gaining 0.25% and 0.04% respectively.
Positive indications surrounding the U.S. – North Korea summit failed to lift market spirits as trade war concerns were revived during the afternoon session after the Trump administration announced that it plans to resume tariffs on Chinese goods valuing $50 billion. The Wall Street’s ‘fear index’ VIX rose dramatically by 28.74%, settling at 17.02 amid today’s global equity sell-off, registering the largest one-day gain since February 5.
On the economic front, Consumer Confidence came in at an 18 year high, rising to 128 in May from a revised April figure of 125.6. A high consumer confidence figure indicated a sturdy economic expansion but failed to provide any relief from today’s sentiments that markets remained focused on global news. Meanwhile, the S&P/Case-Shiller National Index rose at a seasonally adjusted rate of 0.4% as the housing market remains constrained with supply shortage.
Please check the outlook and forecast for tomorrow, Wed, 5/30 below: