A Fade-Trade Could Present Itself Near the Open
It’s just one trade; not a lifestyle change.
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Our View
Musk let go of thousands of employees at Twitter, while Meta announced large-scale layoffs — it has 87,000 employees. In fact, all of FAANG has now either cut jobs, paused its hiring or both.
On Sunday, Apple warned that production of its iPhone production slowed as China laid down more Covid-19 restrictions. MSFT, GOOGL and AMZN all logged new 52-week lows last week and when we think back to earnings, remember that Apple was the only mega-tech stock to rally on its results.
The other five — MSFT, GOOGL, AMZN, META and TSLA — all moved lower. On Meta specifically, “Shares are off more than 70% this year — making it the worst stock in the S&P 500. Nearly $700 billion in market value is gone — more than 496 S&P 500 stocks are individually worth.”
What’s my point? Big-cap tech, the typical leaders in the bull market, are tumbling right now. AAPL has been one of the “bull market generals,” but it too is finally starting to waver. The silver lining is, it’s what we need to see in order to have some capitulation and a market low.
While we cannot rule out some dead-cat bounces, we also believe that it's going to be hard to reverse the tech stock weakness. With another rate hike coming in December and the Fed’s latest mindset of “higher for longer,” tech will continue to weigh on the S&P.
Our Lean — Danny’s Take
The midterm elections are on Tuesday and another batch of government inflation readings are due up on Thursday. Economists expect headline CPI at an annual rate of 7.9%, a moderation from September’s year-over-year increase of 8.2%.
It’s also a full-slate of talking Fed-heads this week, with about half-a-dozen members on the calendar over the next few days.
Combined, all of these events should continue the never-ending volatility.
Our Lean: