The Wall Street Journal reports U.S. Stocks Slide, Dragged Lower by Tech Sector
The Dow Jones Industrial Average tumbled more than 400 points Monday as anxiety over the health of technology behemoths sparked a broad retreat from the stock market.
The blue-chip index of 30 stocks lost 406 points, or 1.6%, to 25583 after posting its biggest one-week gain since March. The S&P 500 lost 1.5% and the Nasdaq Composite dropped 2.7%.
Monday’s selling began in the technology sector, then morphed into a broad rout that dragged lower everything from oil conglomerates to manufacturers to entertainment firms. It was the latest setback for the stock market, which has struggled to break out to new highs since the S&P 500 capped off its worst month in more than seven years.
Apple fell 4.4% after one of its suppliers, Lumentum, cut its earnings and revenue outlook—triggering fresh worries about demand for the company’s iPhone line.
Goldman Sachs tumbled 6.4%, wiping out nearly 100 points from the Dow industrials, as concerns grew over the bank’s interaction with a financier charged with stealing billions of dollars from the 1Malaysia Development Bhd. investment fund. General Electric dropped 5% and headed for its fourth consecutive daily decline after comments from the firm’s chief executive on CNBC failed to assuage investors’ worries about the future of the industrial conglomerate.
Apple Daily Chart
Apple is down 16%. It’s barely a start.
Apple Monthly Chart
Nasdaq 100 – QQQ
The Nasdaq 100 could drop 50% and it would not be cheap. Valuations are absurd.
Shiller PE
On a Cyclically Adjusted PE basis (CAPE) stock are ridiculously valued.
Silly Comment of the Day
The WSJ said “Investors were left scrambling for explanations.”
Wow
What about absurd valuations.
Mike “Mish” Shedlock
Everyone who pays attention knows that the market is grossly over-valued, and that a reversion to the mean has been on the cards for some time. It is smart politics for the President to pre-emptively blame the Democrats for what is coming — and the Democrats will undoubtedly stumble about and make it seem that they are the problem.
But that is not the interesting part. The question is what impact the return to normality in stocks & bonds will have on the real economy? Lots of words have been spilled over the “wealth effect” … but now that the financial economy has become so disconnected from the real economy where workers produce actual goods & services, will the inevitable decline in the financial economy have much effect on the lives of the working population? It looks like we are going to find out!
Commenting on Mish’s post: ‘The WSJ said “Investors were left scrambling for explanations.”
No explanation needed. It’s called FOMO (Fear Of Missing Out). When all your friends own FAANG and tell you in late August what a fool you are when many of them are at all-time highs, you know what to do.
This is nothing more than a classic late-advance psychological mistake. Investors always do it, so no one should be “scrambling for explanations”.
If a South African gold-mining company has the same P/E as, say NFLX, are they both equally valued? What does a P/E ratio tell you? What does the 50-day moving average tell you about what is happening with the economy? Or the 200-day? I’ll leave it up to you to answer for yourself.
Assuming 3.25 is the top on the 10 year Treasury yield, and growth is slowing at the margins (which it is), and the Fed will continue to tighten, which they have promised, (due to the built-in lag in their data analysis) , the US stock market has no way to go but down. Everybody who was long Tech, Industrials, Momentum and Growth are de-risking. Hedge Funds are getting massive withdrawal notices from their limited partners (which they will have to meet at the end of Dec.).The US was the last stock market standing and now the reality being experienced everywhere else in the world is finally catching up to us.
So, where to hide? Long Treasuries, Long Munis, Utilities, REITs, Consumer Staples, Healthcare. Low gross exposure and lots of cash (SHY). Short momentum, growth, tech, semi’s.
It’s never to late to get on the right side of the market.
Given that DJIA and S&P is less than 8% from peak (in an extremely overvalued market) we ain’t seen anything yet. Wake me up when the movie starts.
Mish, you have been predicting the next market downturn for a long time now. I think the House democrats are about to finally make your prediction come true.
Democrat Maxine “I say impeach, impeach, impeach, impeach” Waters is ready to supervise banks and Wall Street…
The Auto Industrial Complex will take a hammering.
Cars were used to pump up industrial activity after the GFC.
Via ZH “Auto Stocks Slide On Reports US Car-Import Probe Is Advancing.”
Let’s see, Maxine Waters is about to take over the House Financial Services Committee, which oversees Banks and Wall Street. Could it be Wall St is worried about that? In case you are completely unaware, “progressive” Maxine is one of the most corrupt politicians in the current swamp.
Democrat Maxine Waters regulating Wall Street and Banks will be an interesting spectacle to see.
I understand why Goldman Sachs dropped -6% in a day.
Back when Ron Paul was on the committee I used to laugh at the questions she’d ask Greenspan. She had no understanding of any of the basics. Of course most of her questions were not really questions but political rhetoric but I get the impression she’s the type who buys the undercoating and extended warranty and then is surprised when the car’s problem isn’t covered.
Maxine’s probably the best thing to happen to the dishonest end of Wall Street in decades.
Before the 2016 election Trump said there was a big fat bubble in the markets but after he got elected he started to claim the markets are going up because him.
In a way he was right since the Paul Ryan engineered tax cuts were a massive giveaway to large companies and their executives and their stock owners.
He has to blame something/someone as he was the reason it has been going up. The stupid crap that comes out his hole never ceases to amaze me. I don’t know why no one in his administration can’t muzzle him, he is an embarrasment to himself and the nation.
As we are discovering in the housing market, we have all been turned into speculators by the Fed’s policies. Let’s see where the indices land if the Fed’s balance sheet ever makes it back below $900 billion…roughly where it was before they bailed out every too-big-to-fail corporation in America.
The Fed’s balance sheet will not even make it back to $3 Trillion before the stock market (and the entire “bubble economy” driven by it) implodes. The crashing oil price is a VERY, VERY bad sign. And not only for those suckers who lent money to the fracking industry.
If the oil keeps going down the frackers will be toast and all that debt the frackers loaded up on will be worthless.
Oil started going down after Saudis got caught torturing and murdering that Saudi critic of Saudi prince MBS in the Istanbul consulate of Saudi Arabia and Mattis demanded that the Saudis need to stop the slaughter of Yemenis in 30 days and USA stopped fueling Saudi jets bombing Yemen in the air.
What the f*ck has USA been doing fueling Saudi (sunni) jets in the air for YEARS while it was clear Saudis were bombing Yemen indiscriminately and using starvation tactics against Houthi (shia) civilians and essentially committing ethnic cleansing of Houthis in Yemen???