S&P 500; US Indexes Fundamental Daily Forecast – Downside Momentum is Building

The major U.S. stock indexes finished lower on Tuesday as investors reacted to weakness in the tech sector and the news that the Republicans postponed the vote on healthcare reform until after the July 4 recess.

In the cash market, the benchmark S&P 500 Index closed at 2419.38, down 19.69 or -0.81%. The blue chip Dow Jones Industrial Average settled at 21310.66, down 98.89 or -0.46% and the technology-based NASDAQ Composite ended the session at 6151.83, down 95.32 or -1.55%.

The NASDAQ opened weaker on Tuesday, putting a lid on any rallies by the Dow and S&P 500. The technology sector was dragged down by a sell-off in Alphabet (Google’s parent stock). Sellers were reacting to the news that the European Commission had fined the company $4.2 billion Euros.

Later in the session, the selling extended after the Republican-led Senate decided to postpone the vote on its health care bill until after the July 4 recess. This probably means they don’t have enough votes to pass the bill. This also likely means further delays in President Trump’s plan to reform taxes.

Investors may have also used this news as an excuse to book profits ahead of the end of the quarter. Traders should also note that the NASDAQ Composite is trading lower for the month after posting a new all-time high earlier in the month. Technically, this means a potentially bearish closing price reversal top is forming. This could lead to the start of a 2 to 3 month correction.

Forecast

U.S. equity markets are already under pressure during Wednesday’s pre-market session. Traders are reacting to weakness in the Asian markets.

On Friday, investors will get the opportunity to react to fresh U.S. economic data. The first report is the Goods Trade Balance, followed by Preliminary Wholesale Inventories and Pending Home Sales. They are not expected to move the overall market, but could affect specific sectors.

If the end of the month, end of the quarter, position squaring continues then look for a lower trade today. Based on the current downside momentum, it looks as if the NASDAQ Composite will lead the markets lower.

Furthermore, investors should also pay attention to crude oil prices. Late Tuesday, the American Petroleum Institute’s weekly inventories report surprised traders with an unexpected build. If the U.S. Energy Information Administration’s weekly inventories report also shows a build then crude oil could break, taking the energy sector with it.

We may also learn more about the reasoning behind the Republican Senators’ decision to delay the vote on the health care plan. Traders are concerned that this will further delay Trump’s plans to rebuild the country’s infrastructure and reform taxes. This will also give investors a reason to trim positions in overbought stocks.