Stocks only go up. Until they don't. The Nasdaq (COMP:IND) yesterday suffered its worst day of 2024, with the tech-heavy index sliding more than 3% ...
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| | Top News  Getty Images Stocks only go up. Until they don't. The Nasdaq (COMP:IND) yesterday suffered its worst day of 2024, with the tech-heavy index sliding more than 3% for the first time in more than 400 trading days. The plunge wiped out hundreds of billions of dollars in market cap from the Magnificent Seven as concerns abound for Big Tech earnings that have propelled the broader market to record highs. A rotation has also made its way into investing sentiment in recent weeks, while other worries center around the broader economy.
Snapshot: The most immediate catalyst for the selloff was a moderate earnings report from Alphabet (GOOG GOOGL) and a disappointing earnings call from tech darling Tesla (TSLA). Spooking investors were shifting tones on the promise of artificial intelligence - for the time being - with Google not reporting any revolutionary profits from its new suite of products and Elon Musk continuing to kick his robotaxi vision down the road. The AI trade has helped support the rally since late 2022, but investors are increasingly demanding that hefty investments in the technology will produce a return, or something can at least be materially seen nearly two years after the release of ChatGPT.
Tech is not the only sector that's experiencing a crisis of confidence as earnings season gets underway (see EVs and commercial real estate). On the macro scale, wage growth and the labor market are cooling, with the unemployment rate recently reaching 4.1% from 3.4% a year ago. U.S. GDP growth data will come later today, while the Fed's favorite inflation gauge will be released tomorrow, providing more clues on the future of monetary policy and the interest rate environment (the next FOMC meeting takes place next week).
SA commentary: "Is this just a random dip, or the beginning of a deeper correction? For most investors, it really doesn't matter, as long as the bull market eventually resumes," writes SA analyst Damir Tokic. "Technically, the S&P500 is in the minor dip territory. What happens next depends on the fundamentals. Alphabet earnings don't give us evidence of the bubble burst yet. We will have to wait for the Nvidia (NVDA) earnings in late August to get confirmation whether we are in the process of Gen AI bubble burst. In addition, the economic data will be important. If the disinflationary trend continues, while the labor market does not weaken further, the Fed could cut in September and this could provide some support to value stocks." | | Sports The drama around the next pro basketball media deal is taking its next steps, as the National Basketball Association rejected an attempt by Warner Bros. Discovery ( WBD) to remain an incumbent by exercising matching rights. The NBA reached a $76B-plus package deal last week with ESPN ( DIS), NBC ( CMCSA) and Amazon ( AMZN), leaving out multi-decade partners TNT and TBS, which are owned by WBD. The next moves may be legal, with the new media arrangement set to take effect in 2025. "We have matched the Amazon offer, as we have a contractual right to do, and do not believe the NBA can reject it," TNT said in a statement. ( 105 comments) | | Aviation Boeing ( BA) has formally filed a guilty plea with the Department of Justice regarding making false representations about key software for the 737 Max linked to two fatal crashes in 2018 and 2019. The DOJ noted that Boeing neglected to ensure employees documented removing parts during airplane manufacture, and didn't confirm if mechanics and inspectors actually completed work. "We will continue to work transparently with regulators as we take significant actions across Boeing to strengthen our safety, quality and compliance programs," the planemaker declared. It will also pay a $243.6M fine as part of the agreement. ( 4 comments) | | Real Estate Property finance company Blackstone Mortgage Trust ( BXMT) sank nearly 12% yesterday after it slashed its dividend by almost 25%, as higher interest rates and falling values drive more defaults in the commercial real estate sector. The reduced dividend "reflects a sustainable level relative to long-term earnings power," said CEO Katie Keenan. In the spotlight is a call by short seller Carson Block from March, which noted that the property market's troubles were likely in the "early innings." He also forecast that multifamily real estate would follow offices in the most-troubled CRE sectors. ( 18 comments) | | Today's Markets In Asia, Japan -3.3%. Hong Kong -1.8%. China -0.5%. India -0.1%.
In Europe, at midday, London -0.6%. Paris -1.8%. Frankfurt -1.2%.
Futures at 7:00, Dow -0.1%. S&P -0.2%. Nasdaq -0.3%. Crude -1.4% to $76.48. Gold -1.6% to $2,378.20. Bitcoin -3.6% to $64,171.
Ten-year Treasury Yield -7 bps to 4.23%. Today's Economic Calendar | | What else is happening... Biggest IPO of the year: A temperature-controlled warehouse REIT. Trump to deliver keynote speech at Bitcoin Conference in Nashville. Ford ( F) profitability skids on higher warranty costs, EV losses. Chipotle ( CMG) soars as restaurant margins improve; peers gain. IBM ( IBM) shares jump as results, guidance top expectations. Biden says time for 'new, fresh voices' in Oval Office address. China surprises markets again by cutting key policy loan rate. Succession feud: Legal battle over Murdoch's media empire. AT&T ( T) subscriber adds beat estimates, free cash flow swells. Wells Fargo ( WFC) set to pull name from Philly sports arena. | | Seeking Alpha's Wall Street Breakfast Podcast Seeking Alpha's Wall Street Breakfast podcast brings you all the news you need to know for your market day. Released by 8:00 AM ET each morning, it is a quick listen that you can put on as you get ready to start your working day. | | | | |
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