The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Ooof.
Tesla and Alphabet reported and were clobbered. Shareholders worried about capex more than anything else and GOOG and TSLA fell 7% and 14% respectively. Those megacaps took the whole market down and every Mag 7 stock lost value today. Treasuries and crude didn’t help stocks either with yields climbing across the curve yet again and crude pushing significantly higher too. The S&P opened down 85 points, tried to recover early, only to fail and bottom out at 11:30 AM, down 120 points at the time. The index spent the rest of the session down about 100 points. Interestingly, capital flow was only 93% today, a surprisingly light day considering the sizeable move in the S&P and the fact that both Alphabet and Tesla triggered it.
Boy oh boy did the first big tech announcements disappoint. To be fair, Alphabet beat by a huge margin and Tesla had some surprising fundamental positives too. What was shocking was that the shareholders did not like what they learned, at all. The stock price responses forces us to wonder, what could megatech possibly report and say in order to drive their stock prices higher? The old lever of spending-even-more-on-AI-capacity is not working. So what *might* work instead?
The bears say nothing can work. They claim that peak hope/hype is slightly in our rearview mirror and now we’ve got to price-adjust back to reality.
It’s a compelling story when the market is having a bad day. That’s for sure. I don’t know how inevitable, or painful, the reckoning will be.
Maybe prices for the megacap stocks stall here, or fall some further, and the S&P 500 remains stuck below all-time highs for a while. Maybe 7000-7400 is the range for a few months. That would certainly be painful to the longs but it wouldn’t be Armageddon either. From a technical standpoint, the S&P just broke support of the 50-day moving average. That’s bad in the short term. I don’t think we’re seeing new all-time highs without a peace-in-the-middle-east announcement.
If I’m right, the bears have the advantage for the rest of earnings season, but they probably can’t kill the bull market either. Megacap does not look like it will lead the bulls to a new promised land. And since they are so big, it’s doubtful anyone else can pick up the slack, even if they have great results and great pops after announcing.
The rest of the summer could be all about hunting and pecking for favorite stocks that are out of favor. Dip-buyers might not be able to just buy everything, they may have to pick and choose.
See you tomorrow.
-Mike
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