Bond Market Signaling Future Results

Here is a daily recap of the S&P 500 broken down by sector followed by sector heat map as bond market signaling future results. Stocks in heat map are based on the top 10 holdings of each sector ETF. Click on each picture to zoom in. Below is a summary of today’s action on Wall Street provided by CNBC:

Dow set to fall 200 points after bond market flashes a recession warning

U.S. stocks were set to open lower Wednesday morning, giving back some of Tuesday’s solid gains, after the U.S. bond market flashed a troubling signal about the U.S. economy. Futures on Dow Jones Industrial Average indicated a negative open of about 207 points. Futures on the S&P 500 and Nasdaq Composite were both lower, as well.

The S&P 500 (SPY) collapsed -2.93% today. All 11 sectors finished in a sea of red. Communication services (XLC), consumer discretionary (XLY), energy (XLE), financials (XLF), industrials (XLI), materials (XLB) and technology (XLK) led the market lower, each losing more than 3%. Healthcare (XLV) fell by more than 2%. Consumer staples (XLP) and real estate (XLRE) fell by more than 1%. Utilities (XLU) came out the winner today, only suffering a minor loss of less than 1%.

The Dow Jones index lost a whopping -800 points (-3.05%) to close at 25,479. The Nasdaq fell sharply -242 points (-3.02%) to settle at 7,773.

Bond Market Signaling Future Results

Stocks collapsed Wednesday after the bond market signaled some worrisome news for the US economy. The yield on the benchmark 10-year Treasury note on Wednesday briefly broke below the 2-year rate, an odd bond market phenomenon that has been a reliable indicator of economic recessions.

There have been five inversions of the 2-year and 10-year yields since 1978 and all were precursors to a recession, but there is a significant lag, according to data from Credit Suisse. A recession occurred, on average, 22 months after the inversion, Credit Suisse shows. And the S&P 500 actually enjoyed average returns of 15% 18 months after an inversion before it eventually turns.

Key Takeaways…

I took the following CNBC screenshots today regarding sector laggards, outperforming, how far from highs, key levels to watch and driving the action:

Notable S&P 500 Movers…

Below I’ve highlighted some notable S&P movers (both winners & losers).

Credit: Sector Graph provided by Sector SPDR app. Sector breakdown provided by Charles Schwab. Sector heat map provided by finviz. Information Credit: News Headlines and quotes were taken from CNBC in the writing of this post.

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S&P 500 Sector Graph

Bond Market Signaling Future Results

S&P 500 (SPY)

Bond Market Signaling Future Results

Communication Services (XLC)

Bond Market Signaling Future Results

Consumer Discretionary (XLY)

Bond Market Signaling Future Results

Consumer Staples (XLP)

Bond Market Signaling Future Results

Energy (XLE)

Bond Market Signaling Future Results

Financials (XLF)

Bond Market Signaling Future Results

Real Estate (XLRE)

Bond Market Signaling Future Results

Healthcare (XLV)

Industrials (XLI)

Materials (XLB)

Technology (XLK)

Utilities (XLU)

S&P 500 Sector Heat Map


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