The Mighty Bear's Growl Is Heard for Miles Around
Today's financial recap and tomorrow's financial outlook.
Tech stocks were in particularly bad shape.
Semiconductor company Microchip Technology (MCHP) preannounced weak fiscal second-quarter revenues, and also said it believes an industry correction is underway, which emboldened the bears. The stock was down 12.3% on the day.
The Microchip news drove extreme weakness in semiconductor stocks, which resulted in underperformance in the NASDAQ Composite vs. the S&P 500 (SPX) and Dow Jones Industrial Average (DJI).
Communications equipment makers also hurt tech, the catalyst being Juniper Networks' (JNPR) weak third-quarter guidance.
Tesla Motors (TSLA) was another problem tech stock, selling off 7.8% after making new product announcements Thursday evening. The company is integrating new all-wheel drive and automated driving features into its vehicle lineup. Some observers were hoping for something bigger, like an entirely new Tesla car.
The NASDAQ fell 2.3% for the day vs. 1.2% for the S&P.
The widely-watched Russell 2000 also had it rough, dropping 1.4%. It is now over 13% off its all-time high set on July 1.
The VIX, which spiked 24% on Thursday's market rout, rose 13.2% today. The historical trend has been for the VIX to drop the day after big increase, so this was an unusual move. In fact, the VIX futures curve has entered into backwardation, meaning traders are paying high premiums for near-term protection against volatility. This indicates serious fear.
In fixed income, high-yield spreads continue widening today as risk remains out of favor with bond market investors. The major high-yield ETFs iShares iBoxx High Yield (HYG) and SPDR Barclays Capital High Yield Bond (JNK) were down 0.8% and 0.9%, respectively.
And perhaps most symbolic of the market's risk-off posture, the only stock market sector that showed gains was the highly-defensive utilities group, which rose 0.5%.
Tomorrow's Financial Outlook
The bond market will be closed Monday in observance of Colombus day. US stocks market will be open.
There are no economic reports or earnings reports on the calendar.
Fear is in the air and risk is falling out of favor. The VIX is spiking, the high-yield market is shaky, and the S&P 500 continues breaking through support levels. Geopolitics, Ebola, and the shaky international economy are adding stress to the system
Traders will continue to look for signs of stabilization and/or selling exhaustion as it's clear the market's character has changed.
Until further notice, the bear rules.
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