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November 17, 2024

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Tech Stocks Plunge: What This Means for Investors

5 Mins Read

“The economy is not sending any signals that we need to be in a hurry to lower rates.” These words from Chairman Powell impacted the stock market much more than this week’s inflation data.

The stock market started selling off on Thursday afternoon and continued to do so Friday, with the broader stock market indexes closing lower. The Dow Jones Industrial Average ($INDU) closed down by 0.70%, the S&P 500 lower by 1.32%, and the Nasdaq Composite ($COMPQ) lower by 2.2%.

It’s also options expiration Friday, which generally means increased volatility. The Cboe Volatility Index ($VIX) gained 12.79% on Friday, closing at 16.14. That’s a big jump from earlier in the week.

Nasdaq’s Fierce Selloff

The Nasdaq experienced the biggest drop of the three indexes. The chip makers got smoked. Applied Materials (AMAT), the largest US chipmaker, was down 8.76% on a disappointing revenue forecast. Nvidia (NVDA) was down over 3%, Micron Technology (MU) was down almost 3%, and Intel (INTC) fell 1.70%.

The daily chart of the VanEck Vectors Semiconductor ETF (SMH) gives a clear picture of the semiconductor industry.

FIGURE 1. DAILY CHART OF THE VANECK VECTORS SEMICONDUCTOR ETF (SMH). The sharp selloff in semiconductor stocks resulted in a technical weakness in the chart of SMH. It’s close to a support level, while its SCTR score, MACD, and relative strength with respect to the S&P 500 weaken.Chart source: StockChartsACP. For educational purposes.

Although SMH is still within the sideways range (grey rectangle), it’s very close to the bottom of the range, which aligns with the 200-day simple moving average (SMA). The StockCharts Technical Rank (SCTR) score is at a low 29, the moving average convergence/divergence (MACD) indicates a lack of momentum, and SMH is not outperforming the S&P 500 like it once did.

Looks like investors are rotating away from semiconductors, either taking profits or investing in other asset classes — but which ones? It’s certainly not healthcare stocks, which also got pounded on Friday. Perhaps cryptocurrencies. However, there’s more brewing beneath the surface.

The Yield Rally

The economy is still strong—retail sales data shows that consumers continue to spend, which is pushing Treasury yields higher. The 10-year US Treasury Yield Index ($TNX) closed at 4.43% (see daily chart below). TNX has been trending higher since mid-September and since the end of September has been trading above its 20-day SMA.

FIGURE 2. DAILY CHART OF THE 10-YEAR US TREASURY YIELD. Treasury yields have been on a relentless yield since September. A stronger US economy would keep yields higher.Chart source: StockChartsACP. For educational purposes.

Fed Chairman Powell and Boston Fed President Susan Collins’ comments lowered the probability of a 25-basis-point interest rate cut in the December FOMC meeting. According to the CME FedWatch Tool, the probability is now 58.2%. It was close to 70% on Thursday, before Powell’s speech.

The relentless yield rally may have been one reason the Tech sector sold off. Higher yields don’t benefit growth stocks.

Dollar’s Roaring Rally

One asset class that is gaining ground is the US dollar. When the words “Dollar sets 52-week high” appear in my predefined alerts dashboard panel, it’s something to analyze. The US dollar ($USD) has been in a relatively steep rally since October (see chart below). With a strong US economy and the Fed indicating a more neutral stance in their policy decisions, the dollar could continue to strengthen.

FIGURE 3. DAILY CHART OF THE US DOLLAR. The dollar has been in a roaring rally since October. A strong US economy supports a strong dollar.Chart source: StockChartsACP. For educational purposes.

At the Close

With the exception of the Dow, the other broader indexes have fallen to the lows of November 6, the day after the US presidential election. The broad-based selloff could continue into early next week. There’s not much economic data for next week, but Nvidia will announce earnings after the close on Wednesday. That should shake up the chip stocks.

If you have cash on the sidelines, there could be some “buy the dip” opportunities. However, because there are some dynamics between stocks, yields, and the US dollar, the three charts should be monitored to identify signs of a reversal. When you’re confident of a reversal, jump on board.

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End-of-Week Wrap-Up

  • S&P 500 down 2.08% for the week, at 5870.62, Dow Jones Industrial Average down 1.24% for the week at 43,444.99; Nasdaq Composite down 3.15% for the week at 18,680.12
  • $VIX up 8.03%% for the week, closing at 16.14
  • Best performing sector for the week: Financials
  • Worst performing sector for the week: Health Care
  • Top 5 Large Cap SCTR stocks: Applovin Corp. (APP); Palantir Technologies (PLTR); Summit Therapeutics (SMMT); MicroStrategy Inc. (MSTR); Redditt Inc. (RDDT)

On the Radar Next Week

  • October Housing Starts
  • November Michigan Consumer Sentiment
  • Fed speeches
  • Nvidia earnings

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

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In World news

Eight killed and 17 injured in mass stabbing in eastern China

2 Mins Read

Eight people were killed and 17 others injured in a stabbing attack on a college campus in eastern China on Saturday, police said — the latest in a recent spate of attacks that has shaken a nation long used to low rates of violent crime.

The attack took place around 6:30 p.m at the Wuxi Vocational Institute of Arts and Technology in the city of Yixing, according to a police statement. A suspect was detained at the scene, it said.

The statement said the suspect was a recent graduate who was motivated by “failing (an) exam, not receiving a graduation certificate, and dissatisfaction with internship compensation.” An investigation is ongoing.

The attack is the latest mass casualty incident to hit China — a country of 1.4 billion that has one of the lowest rates of violent crime in the world, partly due to its strict gun controls and powerful mass surveillance.

Last Monday, 35 people were killed after a car plowed into people who were exercising in the southern city of Zhuhai in the country’s deadliest known attack on the public in a decade. Around 40 others were injured.

As news of that attack spread, censors swooped in to take down online videos of the attack and moderate social media discussions

In October, police arrested a 50-year-old man after a stabbing attack near an elementary school in Beijing injured five people, including three children.

In September, three people were killed and 15 others injured in a knife attack at a suburban supermarket in Shanghai.

Also in September, a bus crashed into a crowd of students and parents outside a school in Tai’an city in Shandong province, killing 11 people and injuring 13 others. Chinese authorities did not reveal whether that incident was accidental or deliberate.

This story has been updated with additional infomation.

This post appeared first on cnn.com

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In Business

Trump’s tariff threats send U.S. companies scrambling for lobbyists and loopholes

4 Mins Read

In the days since President-elect Donald Trump won the presidential race, Nicole Bivens Collinson’s phone has barely stopped ringing.

Collinson, who helps lead the international trade and government relations division at the lobbying firm Sandler, Travis & Rosenberg, said she is fielding “dozens and dozens and dozens” of calls from anxious U.S. companies looking to protect themselves from Trump’s hardline tariff plans by finding loopholes and exemptions.

“Absolutely everyone is calling,” Collinson told CNBC. “It is nonstop.”

Over the course of the 2024 campaign, Trump made universal tariffs a core tenet of his economic platform, floating a 20% tax on all imports from all countries with a specifically harsh 60% rate for Chinese goods.

That hyper-protectionist trade approach sent chills up the spines of economists, Wall Street analysts and industry leaders who warned that across-the-board tariffs could make production — and in turn, consumer prices — more expensive, just as they were recovering from pandemic-era inflation spikes.

“The threat of tariffs has alarmed retailers and a wide range of other U.S. businesses,” David French, senior vice president of government relations at the National Retail Federation, told CNBC. “Our members have been working on contingency plans since President Trump secured the nomination.”

Ron Sorini, a principal at the lobbying firm Sorini, Samet & Associates, echoed that sentiment, noting that he takes at least two to three calls a day to field companies’ concerns about the proposed tariff ramp-up, especially in China.

″[Companies] question where they should go, and how do they get the components out [of China]? How do they get the whole supply chain out?” Sorini said.

When Trump unleashed his first set of China tariffs in 2018, securing an exemption became a golden ticket in corporate America, a way to safeguard a company’s China-based supply chains rather than paying the hefty price of relocation.

And to obtain that golden ticket, it paid to know the right people.

A 2021 research study found that applications for Trump’s first-term tariff exemptions were more likely to be approved when they came from lobbying firms whose employees had made political contributions to the Republican Party.

Now, with Trump set to retake the White House in a matter of weeks, tariff escalation is becoming a more likely reality.

And in corporate America, the race is on to find the right lobbyists to help companies rub shoulders with the right people, to give them an advantage in securing tariff loopholes.

“Firms are prepared,” SUNY Buffalo finance professor Veljko Fotak, one of the authors of the 2021 study, told CNBC. “The real winners of this process are going to be the lawyers and lobbyists.”

What tariffs will look like in the next Trump administration, and whether exemptions will be available at all, are both unknown.

“Until that clarity comes, businesses will have to plan for a variety of scenarios,” Tiffany Smith, vice president of global trade policy at the National Foreign Trade Council, told CNBC.

In response to CNBC’s request for comment about the Trump team’s plan for exemptions and companies’ concerns of the tariff proposals, Trump transition team spokeswoman Karoline Leavitt doubled down on the president-elect’s campaign promises.

“The American people re-elected President Trump by a resounding margin giving him a mandate to implement the promises he made on the campaign trail. He will deliver,” Leavitt told CNBC in a statement.

In the meantime, companies have been trying to set up defenses against Trump’s more aggressive trade approach. These include stockpiling goods in the short run, readying price hikes so they can pass the cost of import duties on to customers, and trying to move their production out of China.

On Thursday, Steve Madden pledged to reduce its Chinese imports by 45% over the next year in anticipation of Trump’s tariff plans.

But exiting China is a significant undertaking for many U.S. companies, especially small businesses that may not have the buying clout or leverage to move production so easily.

“What I would urge is that folks look at the impact on small businesses. Those are the people that are really getting hurt. There’s got to be some way to help companies like that,” Sorini of Sorini, Samet & Associates told CNBC. “Because they really can’t do it on their own.”

This post appeared first on NBC NEWS

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