U.S. Stocks Snap Three-Day Winning Streak as S&P 500 Faces Major Resistance Test

The U.S. stock market traded slightly lower on Thursday, as the S&P 500 Index ran into familiar resistance following a series of oversized gains earlier in the week. A whole lot of nothing in the way of U.S.-China trade progress also kept investors on edge as Beijing’s industrial policy remains a key point of contention for the Trump administration.

Stocks See Modest Pullback

After three consecutive gains, the S&P 500 Index fell 0.1% on Thursday to close at 2,808.48. Six of 11 primary sectors finished in negative territory, with materials falling 0.8%. Shares of communication services and industrials companies also declined faster than the benchmark index.

The technology-focused Nasdaq Composite Index declined 0.2% to 7,630.91. Like the S&P 500, the Nasdaq approached five-month highs during the prior session.

The Dow Jones Industrial Average pared losses to close relatively flat at 25,709.94. The index was weighed down by Boeing’s eighth consecutive decline. The aerospace and defense contractor is plunging over fears that its flagship 737 airliner is unsafe for flying.

S&P 500 Index Faces Critical Resistance Test

The S&P 500 Index is coming up against an all too familiar resistance. Since October, the index has failed to definitively break above 2,800, faltering on at least four different occasions. Although the latest rally put the S&P 500 over the edge, significant downside risks remain. Read: Does this Chart Spell Doom for the S&P 500 Index?

In addition to being a known area of supply, 2,800 represents the region where many traders start to believe stocks are overpriced. When the S&P 500 exceeds this level, the average per-share earnings of its constituents grow to 16.5 times forward earnings. According to Bloomberg, that’s high sign that the market is overvalued.

Valuation risks are further compounded by grim earnings guidance for Q1 2019. According to financial research firm FactSet, all 11 primary sectors tracked by the S&P 500 Index saw a decline in their bottom-up earnings per share estimate during the month of January. The figure fell faster than the five-year, ten-year and 15-year averages.

U.S.-China Trade Talks Delayed Until April

Trade negotiations between the United States and China will be on hold until April as the two superpowers grapple over Beijing’s industrial policy. Last month, The Wall Street Journal reported that a new trade deal was in the works and that President Trump was prepared to invite China’s Xi Jinping to a signing summit in Florida.

Now, it appears that talks will be on hold for at least another two weeks. As CCN reports, Trump recently stated that he is “in no rush” to finalize a deal but did point to April as a likely target date.

China’s economy showed further signs of stagnating in the first two months of the year. Industrial output for January and February expanded 5.3% annually, the slowest in 17 years. Analysts in a median estimate had expected growth to cool to 5.5% from December’s 5.7%.

Featured image courtesy of Shutterstock. Chart via Stockcharts.com.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi