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S&P 500; US Indexes Fundamental Daily Forecast – Many to Blame for Early Session Sell-off

U.S. equity indexes are recovering nicely from early session weakness but remain in a position to close lower for the session.

A drop in shares of Apple appears to be the catalyst behind the pre-market sell-off which saw the Dow plunging over 100 points. The tech giant’s shares lost about 2.5 percent during the session, amid speculation of poor demand and cuts in production of iPhone8. The stock is in a position to post its biggest one-day loss in a little over two months.

While Apple may have been the biggest drag on the Dow, it also had an effect on the benchmark S&P 500 Index, which also declined during the pre-market session. The index was also pressured by weakness in information technology and consumer staples stocks. One of the biggest decliners in the index was United Continental. The parent company for United Airlines posted its biggest lost since August 10.

E-mini Dow Jones Industrial Average
Daily December E-mini Dow Jones Industrial Average

As of late Thursday, shares of United Continental Holdings were trading 11 percent lower, following a tense earnings call, in which CEO Oscar Munoz said the airline “dug itself in a hole” in regard to competition.

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The airline is facing intense competition from low-cost airlines. The airline has been trying to increase capacity, but at the same time, any gains are being offset by rising fuel and other costs.

E-mini S&P 500 Index
Daily December E-mini S&P 500 Index

In addition to the weakness in Apple shares, some traders are saying heavy selling pressure in Europe was behind the early session weakness. European traders are blaming the sell-off on an overreaction to the situation whereby the Spanish government suspended Catalonia’s autonomy after regional leader Carles Puigdemont failed to drop a bid for independence. European traders are also keeping an eye on the Spain situation and its possible impact on Italy.

Finally, in Asia, traders are saying that their major stock indexes fell because of comments from a Chinese leader. The Hang Seng Index and Shanghai Composite fell 1.9 percent and 0.35 percent after People’s Bank of China Governor Zhou Xiaochuan warned of a sudden collapse in asset prices.

The recovery by the indexes only shows that the markets were not ready to go down and that buyers are still coming in on the dips. Bull markets just don’t end with a new record high then a spike to the downside. It takes time to build a top and the current price action only indicates that investors are getting nervous enough to take profits, but not make major shifts to their portfolios.

This article was originally posted on FX Empire

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