Fed Plus Valuation Lead Cautionary Signs

Here is a daily recap of the S&P 500 broken down by sector followed by sector heat map as Fed plus valuation lead cautionary signs. 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:

US futures lower as Fed rate cut hopes are dashed by strong jobs data

U.S. stock futures are trading lower Monday morning as strong jobs data dampened expectations that the Federal Reserve will cut interest rates anytime soon. As of 06:35 a.m. ET, Dow futures fell 80 points, indicating a drop of 115 points at the open. S&P 500 and Nasdaq futures were also in negative territory.

The S&P 500 (SPY) lost -0.48% today. Sector decliners led advancers 6 to 5 as shown below in the sector graph. Pushing down decliners were materials (XLB) with a loss of 1.15%. Communication services (XLC), financials (XLF), healthcare (XLV), industrials (XLI) and technology (XLK) each suffered minor losses of less than 1%. Consumer discretionary (XLY), consumer staples (XLP), energy (XLE), real estate (XLRE) and utilities (XLU) each enjoyed small gains of less than 1%.

The Dow Jones index finished in the red by 115 points (-0.43%) closing at 26,806. The Nasdaq subtracted 63 points (-0.78%) to settle at 8,098.

Fed Plus Valuation Lead Cautionary Signs

Stocks closed lower on Monday as valuation and uncertainty from the Fed pressured stocks. Several analyst notes came out on Monday noting high tech valuations. Apple shares fell more than 2% after an analyst at Rosenblatt Securities downgraded the stock to sell from neutral. The analyst said the company will “face fundamental deterioration over the next 6 to 12 months ” as Apple’s iPhone sales disappoint and growth in other products slows down. AB Bernstein tech analyst Toni Sacconaghi is worried about the tech sector moving forward given its sky-high valuation and a deteriorating earnings picture.

Investors also wait to hear testimony from Fed Chair Jerome Powell on Wednesday. It will be his first comments since a surprisingly good jobs report on Friday, putting a July rate cut in doubt. Despite the doubt, traders have priced in a 100% probability of a Fed rate cut in July, according to the CME Group’s FedWatch tool. However, expectations for a more aggressive cut were tempered by the jobs data released Friday.

Key Takeaways…

I took the following CNBC screenshots today regarding flattish earnings in 2019 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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7/8/19

S&P 500 Sector Graph

Fed Plus Valuation Lead Cautionary Signs

S&P 500 (SPY)

Fed Plus Valuation Lead Cautionary Signs

Communication Services (XLC)

Fed Plus Valuation Lead Cautionary Signs

Consumer Discretionary (XLY)

Fed Plus Valuation Lead Cautionary Signs

Consumer Staples (XLP)

Fed Plus Valuation Lead Cautionary Signs

Energy (XLE)

Fed Plus Valuation Lead Cautionary Signs

Financials (XLF)

Fed Plus Valuation Lead Cautionary Signs

Real Estate (XLRE)

Fed Plus Valuation Lead Cautionary Signs

Healthcare (XLV)

Industrials (XLI)

Materials (XLB)

Technology (XLK)

Utilities (XLU)

S&P 500 Sector Heat Map

 

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