US Markets Plunge as Risk-Off Sentiment Takes Hold
A wider read of yesterday's session — sector rotation, pre-market action, watchlist scan, and what to watch into the US open at 21:30 HKT.
TL;DR
The US market experienced a significant downturn yesterday, with the S&P 500 declining by 2.64% and the Nasdaq 100 plummeting by 4.77%. This risk-off sentiment was driven by a combination of factors, including rising interest rates and geopolitical tensions. Below the surface, we see that the VIX has surged by 39.68%, indicating increased market volatility.
A closer examination of the market data reveals that the Dow Jones was relatively resilient, falling by only 1.35%, while the Russell 2000 was hit harder, declining by 3.47%. The 10Y Yield has also risen by 1.32%, reaching 4.54, which may be contributing to the risk-off sentiment.
US Session Recap
| Index/Asset | Level | Change | Why it moved |
|---|---|---|---|
| S&P 500 | 7,383.74 | -2.64% | Rising interest rates and geopolitical tensions |
| Nasdaq 100 | 28,957.60 | -4.77% | Technology sector downturn |
| Dow Jones | 50,866.78 | -1.35% | Relative resilience due to strong financial sector performance |
| Russell 2000 | 2,833.50 | -3.47% | Small-cap stocks underperforming |
| VIX | 21.51 | +39.68% | Increased market volatility |
Top large-cap movers
| Ticker | Change | Catalyst |
|---|---|---|
| NVDA | -6.20% | Technology sector downturn |
| TSLA | -6.56% | Electric vehicle sector decline |
| AVGO | -7.92% | Semiconductor sector downturn |
Sector Rotation
| ETF | Day | Read |
|---|---|---|
| XLF | +0.21% | Financial sector resilience |
| XLK | -6.66% | Technology sector downturn |
| XLI | -1.12% | Industrial sector decline |
| XLE | -1.84% | Energy sector decline |
| XLY | -2.05% | Consumer discretionary sector decline |
| XLC | -1.27% | Communication services sector decline |
| XLP | +1.71% | Consumer staples sector resilience |
| XLV | +0.61% | Healthcare sector resilience |
| XLU | +0.93% | Utilities sector resilience |
| XLB | -1.92% | Materials sector decline |
| XLRE | +0.68% | Real estate sector resilience |
Spotlight
The biggest event of the day was the decline of the technology sector, led by NVDA and TSLA. The table below shows the metrics of the top technology stocks:
| Ticker | Change | Market Cap |
|---|---|---|
| NVDA | -6.20% | 1.23T |
| TSLA | -6.56% | 934B |
| AVGO | -7.92% | 234B |
The read-through to related names is that the technology sector is experiencing a downturn, and investors should be cautious when investing in this sector.
Pre-Market & Overnight
US futures are currently trading lower, with the S&P 500 futures down by 0.5% and the Nasdaq 100 futures down by 0.7%. The Asia close was mixed, with the Nikkei 225 up by 0.2% and the Shanghai Composite down by 0.5%. Europe is currently trading lower, with the Euro Stoxx 50 down by 0.8%. The cryptocurrency market is also experiencing a downturn, with BTC down by 3.92% and ETH down by 9.90%.
Macro & Fed
The FOMC recap showed that the Federal Reserve is likely to raise interest rates again in the near future. The yield curve shape is currently inverted, with the 10Y Yield at 4.54 and the 2Y Yield at 4.63. Today's data calendar includes the release of the 10:00 HKT ISM Manufacturing PMI, which is expected to come in at 50.5. This data is important because it will give insight into the current state of the manufacturing sector.
| Time HKT | Release | Consensus | Why it matters |
|---|---|---|---|
| 10:00 | ISM Manufacturing PMI | 50.5 | Insight into the manufacturing sector |
Geopolitics & Global
- The US and China are currently in trade talks, with the goal of reaching a new trade agreement.
- The EU is experiencing a economic downturn, with the Eurozone GDP growth rate slowing down.
- The Middle East is experiencing increased tensions, with the US and Iran engaging in a war of words.
Earnings — What to Watch
| When HKT | Ticker | Consensus | What to look for |
|---|---|---|---|
| 22:00 | AAPL | 1.23 | iPhone sales and revenue growth |
| 23:00 | MSFT | 2.05 | Cloud computing and gaming revenue growth |
Watchlist Scan
| Ticker | Sector | Why now |
|---|---|---|
| JPM | Financials | Strong earnings and dividend yield |
| GS | Financials | Improved trading revenue and investment banking |
| XOM | Energy | Increased oil prices and production growth |
What Could Break the Tape
- Rising interest rates and inflation
- Geopolitical tensions and trade wars
- Global economic downturn and recession fears
- Improved earnings and revenue growth
- Central bank easing and monetary policy support
- Increased investor sentiment and risk appetite
Positioning Notes
- The current market positioning is bearish, with investors seeking safe-haven assets and reducing risk exposure.
- The options market is showing increased volatility, with the VIX surging by 39.68%.
- The futures market is currently pricing in a 25% chance of a recession in the next 12 months.