From the FXWW Chatroom: After the brief respite on Mon, the selling resumed Tues w/the SPX slumping ~46
points. While there are plenty of macro headwinds (trade, White House staffing turmoil, Fed
tightening, sluggish growth, etc.) the biggest problem for the SPX is more micro in nature as the
super-cap tech complex is still suffering through positioning-led indigestion. The NYT Cambridge
Analytica article on FB (back on 3/17) was the initial catalyst and while investors were quick to
isolate the problem to just FB (and its ad-supported internet peers) it’s very difficult for a stock that
important to suffer such a sudden and steep descent w/o having broader repercussions. The
performance pain inflicted by FB unsettled the whole super-cap complex and it is the precarious
state of these stocks that is acting as the biggest risk to the SPX (and it’s also the key difference
between this most recent slump and prior ones – during past dislocations investors flocked to supercap
tech as a safe haven but that isn’t occurring now). Tech’s fragility was laid bare by the reaction
to the NVDA news mid-day (fundamentally the autonomous driving suspension means very little
but it had an outsized influence on the stock and tech in general – this speaks more to psychology
than anything else). Fundamentals in tech are still very healthy, the space is sitting on enormous
cash balances (which will be returned to investors in larger quantities going forward – AAPL in
particular is expected to announce a huge capital return increase alongside its CQ1 earnings report),
and the group could experience some stability once the end of the quarter has past. However, for
the time being there is more unwinding that needs to occur and the barren calendar doesn’t help
(the market will probably stay in a news vacuum until the Mar jobs report on Fri 4/6).
US equity sector trends – tech was the big problem as the S5INFT index slumped ~3.5%. NVDA and
TSLA were cited as fundamental sparks but the tech selling has been ongoing for several days now
points. While there are plenty of macro headwinds (trade, White House staffing turmoil, Fed
tightening, sluggish growth, etc.) the biggest problem for the SPX is more micro in nature as the
super-cap tech complex is still suffering through positioning-led indigestion. The NYT Cambridge
Analytica article on FB (back on 3/17) was the initial catalyst and while investors were quick to
isolate the problem to just FB (and its ad-supported internet peers) it’s very difficult for a stock that
important to suffer such a sudden and steep descent w/o having broader repercussions. The
performance pain inflicted by FB unsettled the whole super-cap complex and it is the precarious
state of these stocks that is acting as the biggest risk to the SPX (and it’s also the key difference
between this most recent slump and prior ones – during past dislocations investors flocked to supercap
tech as a safe haven but that isn’t occurring now). Tech’s fragility was laid bare by the reaction
to the NVDA news mid-day (fundamentally the autonomous driving suspension means very little
but it had an outsized influence on the stock and tech in general – this speaks more to psychology
than anything else). Fundamentals in tech are still very healthy, the space is sitting on enormous
cash balances (which will be returned to investors in larger quantities going forward – AAPL in
particular is expected to announce a huge capital return increase alongside its CQ1 earnings report),
and the group could experience some stability once the end of the quarter has past. However, for
the time being there is more unwinding that needs to occur and the barren calendar doesn’t help
(the market will probably stay in a news vacuum until the Mar jobs report on Fri 4/6).
US equity sector trends – tech was the big problem as the S5INFT index slumped ~3.5%. NVDA and
TSLA were cited as fundamental sparks but the tech selling has been ongoing for several days now
and Tues was just a continuation of that pattern (a report mid-day about NVDA suspending its
autonomous driving program was cited for that stock’s swoon although the price action probably
wouldn’t have been very dissimilar regardless of the headlines). The fins were another big source of
pressure – while tech has the biggest positioning problem, the fins are quite popular too (which is
working against them as investors dial back risk exposure) and the TSY rally didn’t help sentiment.
Biotech lagged too. Safer-haven areas outperformed, including staples, utilities, telecoms, and REITs
(although within REITs, some of the mall-linked names were hit as investors were underwhelmed by
the final GGP-Brookfield price). GE experienced a short squeeze on some vague Buffett headlines
(mentioned on Bloomberg and elsewhere).
autonomous driving program was cited for that stock’s swoon although the price action probably
wouldn’t have been very dissimilar regardless of the headlines). The fins were another big source of
pressure – while tech has the biggest positioning problem, the fins are quite popular too (which is
working against them as investors dial back risk exposure) and the TSY rally didn’t help sentiment.
Biotech lagged too. Safer-haven areas outperformed, including staples, utilities, telecoms, and REITs
(although within REITs, some of the mall-linked names were hit as investors were underwhelmed by
the final GGP-Brookfield price). GE experienced a short squeeze on some vague Buffett headlines
(mentioned on Bloomberg and elsewhere).
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