A week to remember… a decisive election, a distraught market, hapless investors and traders taken to task by their favorite ‘hot stocks.’ Even the ‘magnificent 7’ were not magnificent. For several weeks prior to the midterms stock patterns were indecisive, floundering, marking time in anticipation of election day. Midterm results rocked the market…and the nation as Democrats swept nearly every race, taking back both the Senate and the House of Representatives, sending a resounding mandate for political change. Thursday’s Nasdaq Composite gave up $ 2.5 trillion in valuation slicing technology, artificial intelligence, semiconductor stocks across the board, significantly lower. Favored market leaders gave back months of appreciation, dropping back to realistic valuations. “What we got out of the election was quantifiable evidence that there is real disdain for the data–center build–out,” said Matt Rowe, senior portfolio manager at Man Group. He added; “All else equal, these projects are going to take longer to get executed, and they’re going to cost more to do.” The VIX index, known as Wall Street’s “fear gauge” jumped to its highest level since March, “triggered heavy fund selling” amplifying the heavy sell off.
Monday’s market opened on fire….as investors and traders scooped up technology, AI, chips and semiconductor stocks at appealing prices. All three indexes were ‘blazing hot’ with The Dow Jones Industrial Average soaring 1107 points, recovering much of Thursday’s bloodbath. The Nasdaq Composite, loaded with many investor favored techs and AI issues, was up big-time, 2.7%, while the S&P 500 added 2.3%. As quoted byThe Wall Street Journal, “423 of the S&P 500’s ‘members’ closed higher, and steep, with that benchmark index posting its best day in seven months.” Every sector of the S&P 500 was higher. The smaller value company Russell 2000 index followed, closing up 3.1%, as all 4 indexes recovered nicely from the “big loss election week.” As stock valuations ‘settled-out’ investors had the opportunity to buy in less expensively. “Realitity is just setting in –that the underlying economy is robust,” said Kieran Osbourne, chief investment officer at Mission Wealth. Brent crude fell 5.8%, settling at $90.72 a barrel, while West Texas crude traded at $85.73 a barrel, after President Trump’s remarks of easing the Iranian attacks. The Labor Department released the October jobs report showing 165,000 new jobs added. The September and August numbers were revised higher, with 84,000 jobs added for the two months, far exceeding what economists had predicted. Unemployment through October stood at 4.2%, and steady.
Markets were soft Tuesday, heavily influenced by rising consumer prices and comments by Fed official Christoher Waller… He reiterated that “he could support a ‘larger-than-normal’ half point rate increase in December.” The CPI (Consumer Price Index) report was his justification as he said. “Waller’s comments really laid the groundwork for pretty substantial market-sensitivity to an upside surprise, and that’s what we got.” said ZackGriffiths, head of investment-grade and macro strategy at research firm CreditSights. All three indexes suffered the negative news with the S&P 500 and Nasdaq dropping 0.4% and 0.7% respectively. The blue-chip Dow Jones Industrial Average lost 0.3% as investors worried over data-center build-out costs amid rising inflation. Also contributing to the struggling markets is the ongoing fall-out over the CEO of Nvidia’s relationship with a purported Chinese female spy, as the board has authorized an internal investigation. The decreased Nvidia valuation of $430 billion, attributed to Mr. Jensen Huang has distorted investor confidence with many calling for his resignation. Wednesday’s market rallied as investors flocked back to AI and tech bargains, driving indexes higher. The Dow Jones was up to 255 points while both the S&P 500 and Nasdaq added 1.3% and 1.6% respectively. “You’ll start to see winners and losers emerge” said Brock Weiner, investment strategy analyst at Edward Jones. “I don’t know that every AI investment is going to be rewarded in the same manner.”
RUMBLINGS ON THE STREET
Mark Hackett, chief market strategist at Nationwide, WSJ – “It’s almost become a meme. The kind of universal belief that the Democrats have won, so therefore the AI trade is over on Thursday looks hyperbolic at best right now.”
Dan Rissmiller, chief economist at Baird Strategies, WSJ – “I guess you’re going to get a ‘family fight’ at the FOMC meeting in December.” (Referring to a term Fed chief used,”Vigorous policy debate”)
Angela Palumbo, Writer of “Tech Trade” at Barron’s – “Hyperscalers couldn’t slow down data-center spending on their own, but the midterms may have given them the perfect excuse to do just that.
