This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics. The market took a beating today, led by significant drops in some of the largest stocks in the world. Trade ideas thread – Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:
By Eamonn Sheridan
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 20, 2020.
Lucas Jackson | Reuters
This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics.
- It turns out stocks don’t only go up. In fact when they go up a lot in a hurry, it becomes harder for them to keep going up.
- No real news or data catalyst for today’s little hiccup in the indexes – just as news and data were not really behind the ramp in the high-growth favorites on the way up. The Nasdaq-100 surged 14% in three weeks into yesterday, now shedding about 4%. At this point just a give-back of some outsized short-term gains, still within the uptrend. Could easily be a few more percent of downside before we call this more than a sharp but normal gut check.
- The backdrop: An upside overshoot stoked by a buying frenzy from smaller investors and trend-following funds; rare overbought conditions; frothy sentiment seizing on stock splits and other flimsy premises; Tesla calls the market’s bluff with a share sale and its biggest backer takes profits.
- The tactical context: A mad rush of call-option buying created a self-reinforcing upward spiral in shares of the cult tech stocks, enough to force market makers to drive up both the stocks and volatility gauges. Erratic vibrations, now resulting in a quick unwind. Traders have pointed out Wednesday has been the strongest day of the week lately – the day weekly options expire. And Thursdays the weakest (including June 11, the last time we had a comparable one-day sell-off).
- VIX at 30 and Nasdaq VIX (VXN) at 40 reflect a bit of equity stress and forced hedging. See if it burns itself out or if this is the start of some late-summer storminess, which we all noted is pretty common after a strong August.
- Some sector/factor pinball going on, with value/financial sectors bouncing relative to the dominant growth areas. Still pure mean-reversion in this case, so far. Here’s Nasdaq 100 relative to banks. Outperformance has been persistent but this week bumped against a multi-year extreme.
- Typically the market likes to pull itself into a neutral positions of sorts ahead of a big data release such as Friday’s employment report. Maybe we were overbought enough that the indexes needed to drop to get back in balance, though one could argue the fate of this market isn’t too tightly caught up in one payrolls print at this point.
- Treasuries rallying pretty hard on the equity dump, 10-year back down to 0.61%. Decent jobless claims had no legs in prompting bond weakness.
- Market breadth is poor but less bad than one might expect, 1:3 up:down volume on NYSE, 1:5 down on Nasdaq.
Author: Michael Santoli
Microsoft, Apple, and Alphabet Led the Stock Market Lower on Thursday
The stock market crashed hard on Thursday, Sept. 3. At 1:15 p.m. EDT, the Dow Jones Industrial Average stood 2.6% lower and the broader S&P 500 index had fallen 3.4%. The tech-heavy Nasdaq Composite led the pack with a decline of 4.6%, giving us a big clue to the drivers of this sharp market drop.
A familiar trio of trillion-dollar market caps led the way here. Shares of iPhone maker Apple (NASDAQ:AAPL) posted a 6.8% loss and software giant Microsoft (NASDAQ:MSFT) slumped 5.9%. Google parent Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) fared slightly better, limiting its decline to approximately 5.3%.
Together, these sudden dives added up to $382 billion in lost market value at press time.
Image source: Getty Images.
None of these tech titans had any terrible news of their own today. If anything, their business updates should have moved the stock prices higher. Apple introduced a new feature for mobile app developers designed to boost the number of paying subscribers for iOS apps through easy-to-use subscription offer codes. Google scored a big win with cloud computing services helping the U.S. military predict cancer diagnoses. But investors shrugged off these mildly positive tidbits.
The sell-off starts to make sense when you look at Microsoft’s, Alphabet’s, and Apple’s recent stock charts. Here’s how the tech giants’ stocks have performed in 2020 leading up to Thursday’s dramatic correction:
AAPL data by YCharts.
There’s no reason to cry for tech investors today, though. Alphabet’s stock is still up 22% year to date, trailing Microsoft’s 38% gain and Apple’s enormous 67% price increase.
It’s true that the COVID-19 health crisis has boosted the profile of many technology companies. Work-from-home policies are undeniably good news for businesses that sell products and services in the office productivity market, and all three of these companies are leaders in that space. At the same time, the stock market as a whole has been overheated lately. The major benchmarks are mostly back where they were before the coronavirus crisis, excepting the Nasdaq. A correction seems to be in order at this point, and things could get much worse if there’s a second wave of COVID-19 cases in store.
To be clear, none of the stocks mentioned above did anything wrong today. They’re just being ensnared in the broader market slump. Their charts could very well turn upward again in a hurry, but there might also be further corrections on tap in the coming days. All of this depends on factors outside of Apple’s, Alphabet’s, and Microsoft’s control, including coronavirus trends, election results, and the rate of political progress on a second stimulus bill.
This overdue correction is certainly no reason to panic. Everything you knew about these companies and their business prospects yesterday is just as true today. The only thing that changed was the market’s attitude toward high-flying tech stocks in the face of rising uncertainty. You could even pick up some shares at lower prices today. Perfect market timing is an impossible game, but serious investors can take advantage of temporary price drops when they come along.
Author: Anders Bylund
Trade ideas thread – – Friday 4 September 2020
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