Financial News vs. Noise
The grid kind of tells the story of the divergence between the large cap growth stocks that have been rallying non-stop this year and everything else.
Tech selloff leads Magnificent Seven to nearly its worst day ever by this metric-MarketWatch
Declines in Tesla, Nvidia and other large tech stocks meant a $598 billion market-cap wipeout for the ‘Magnificent Seven’ — the second-largest one-day total on record
The question now is whether this was a one day rotation rally and we go back to our regularly scheduled programming, or this is the start of something bigger. It’s early, but everything is green this morning, however the QQQs are up 4bps while IWM is up 92bps. Sometimes green to red days are easy to spot, and yesterday was one of those. You had a sense that once the market popped on weaker than expected CPI and then immediately retraced those gains that you were in for something. This morning my long watchlist is all software and semi names and my short watchlist is a mile long with mostly value type names. I’m mostly a mean reversion trader so to go long a stock has to drop and to go short it has to pop, so we may not enter anything, just interesting to see the divergences in my own models.
Rates coming down certainly didn’t hurt things yesterday. Small stocks tend to be more rate sensitive. The market now seems to be fully pricing in a September cut, which is also why I wouldn’t panic on large cap tech.
Latest from Nickileaks…
Milder Inflation Opens Door Wider to September Rate Cut-WSJ
From Jefferies….
As long as Fed September rate cut expectations remain on the cards, we expect the narrative to support risky assets. Yesterday saw a big rotation out of Tech stocks into the broader index. Russell close up +3.47% while NASDAQ was down close to 2% on the day. A resilient economy with slowing inflation should indeed lead to Russell outperforming. But with our view that the economy (and the labour market) will slow down over the coming months, we do not see a sustained outperformance of Russell over NASDAQ. We do admit that positioning is more crowded in the Tech sector and some rotation makes sense. But when the froth is cleared up, we expect the Tech sector to continue its outperformance.
For those worried about breadth, the percent of S&P stocks above their 20 day moving average jumped massively.
TSLA was interesting yesterday, it got demolished intraday on a report that the robo taxi would be delayed. I’d watch the 10 day for support.
Tesla downgraded to sell as UBS says the stock overvalues growth opportunities-MarketWatch
The analysts say they don’t believe Tesla can get to 5 million vehicles by 2030, forecasting the electric-vehicle maker to reach 3.9 million units. And they say their outlook on the medium term, from 2025 to 2027, is 11% below consensus.
“Our view is informed by more tepid demand for EVs (and demand saturation for the current model lineup) in the U.S. and more competitive markets in Europe and especially China,” they say.
Bank earnings on tap…..
Bank Earnings: JPMorgan, Wells Fargo, and Citi Prepare to Release Results-Barron’s
Don’t forget the consumer….
Inflation-weary shoppers are finally cutting back on potato chips.
For the past few years as prices soared, many consumers kept buying affordable treats like Doritos and Lay’s in lieu of bigger-ticket splurges such as restaurants, concerts or travel. But now, they are limiting their spending in all areas, said Jamie Caulfield, PepsiCo’s PEP 0.22%increase; green up pointing triangle chief financial officer.
Signs keep accumulating that U.S. consumers are in trouble. Investors are paying heed.
Today we have PPI and U Michigan data. The only main Fed head is Goolsbee.
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