S&P 500; US Indexes Fundamental Daily Forecast – Investors Liquidate Shares on Uncertainly Over China Tariffs

The major U.S. stock indexes plunged on Thursday, driven by worries of a potential trade war with China and a steep decline in technology stocks. The indexes were also pressured by a sharp decline in bank stocks as investors expressed disappointment with the Fed’s decision to hold at three rate hikes in 2018.

The catalyst behind the sell-off was the Trump Administration’s unveiling of tariffs designed to punish China for intellectual property theft. The sanctions imposed are about $60 billion in retaliatory charges. Investors are now awaiting a response from China which will mark the beginning of a trade war.

Investors are liquidating shares because historical data and past experience shows these policies are flawed and could disrupt today’s complex global supply chains.

In the cash market, the benchmark S&P 500 Index settled at 2643.69, down 68.24 or -2.52%. The blue chip Dow Jones Industrial Average closed at 23957.89, down 724.42 and the tech-based NASDAQ Composite ended the session at 178.48.

As expected, the futures markets posted similar results with the June E-mini S&P 500 Index closing down 75.00 or -2.76% at 2643.25. The June E-mini Dow Jones Industrial Average finished lower by 764 or -3.09% at 23963 and the June E-mini NASDAQ-100 Index posted a loss of 192.00 points or -2.79% at 6692.00.

Seven or 11 sectors in the S&P 500 Index posted greater than 2 percent losses. Financials was the worst-performing sector in the index, plunging 3.7 percent. It was also its worst performance since February 8 when it dropped 4.5 percent.

Caterpillar, 3M and Boeing were the Dow’s biggest decliners. Caterpillar fell 5.7 percent, 3M declined 4.7 percent and Boeing settled 5.2 percent lower.

In the tech sector, shares of Facebook continued to decline in reaction to the news that data research firm Cambridge Analytica gathered data from 50 million Facebook profiles without the permission of its users. Shares of Facebook are down about 10 percent this week.

Google-parent Alphabet fell 3.6 percent and dipped into correction territory.

Forecast

Thursday’s price action indicates that momentum is now trending lower. Although the markets are still trading above their February lows, volatility is elevated enough to suggest these lows could be easily challenged.

If the downside momentum continues then 2532.50 will become the primary downside target for June E-mini S&P 500 Index traders. The June E-mini Dow Jones Industrial Average target is 23122 and the target for the June E-mini NASDAQ-100 futures contract is 6192.50.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose above 22. This indicates that elevated volatility and wide price swings can be expected over the near-term.