The market turbulence continues.
On Wednesday, stocks had another volatile day with the Dow trading up as many as 300 points before closing just slightly in the red while tech stocks lagged the market. Meanwhile, Treasury yields resumed their march higher with the 10-year Treasury yield getting back to 2.85%.
The economic calendar will be mostly empty, with the weekly report on initial jobless claims serving as the lone highlight.
And while the markets on Wednesday appeared to be finding something like equilibrium after a few chaotic days, something not to be ignored as we head into trading on Thursday is the underperformance of big tech stocks.
Alphabet (GOOGL), down 2.7%, Facebook (FB), down 2.7%, Microsoft (MSFT), down 1.9%, Amazon (AMZN), down 1.8%, and Apple (AAPL), down 2.1%, all lost more than the market. These stocks, of course have been leaders during the recent bull run and lost ground in-line with the major averages during Monday’s big sell-off.
In a note to clients on Tuesday, Nicholas Colas at DataTrek research wrote that, “Given our daily focus on the importance of technological disruption and our long-standing recommendation to overweight the group, we are pleasantly surprised that investors seem to be using the sector as a shelter in the storm.”
Colas added, however, that if the U.S. market can’t find a bottom without tech — which has led the market over the last year — falling apart first, than we may not have seen markets finding a near-term bottom, even with the furious rally seen Tuesday.
Something to keep an eye on.
Donald Trump tweets about the stock market again
On Wednesday morning, after three chaotic days on Wall Street, President Donald Trump finally broke his silence on the issue.
“In the ‘old days,’ when good news was reported, the Stock Market would go up,” Trump said in a tweet. “Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (great) news about the economy!”
And while one can certainly sees the holes in this argument — What does the “old days” mean? Is this technically true? — the general frustration with the stock market having declined so violently amid an abundance of good news makes sense. Trump, in his way, illuminates a clear frustration that the public certainly has with financial markets. Which is that sometimes things which make no sense are supposed to make sense to investors.
A popular explanation about why the stock market started to decline, at least last Friday, is that the good news about wages (wages rose at the fastest pace since the financial crisis in January), is actually bad news for the bond market and, in turn, bad news for the stock market. Which, on its face, is sort of silly.
Because while many will contend that the stock market is not representative of the economy, the stock market does capture how corporations are performing which, in turn, captures something about how the parts of the economy corporations are exposed to perform. And in the long run, the stock market actually is a decent proxy for the economy.
The stock market falling because of good things happening in the economy, then, doesn’t make much sense.
And indeed, the more popular explanations for what happened on Monday have coalesced around the rapid unwinding of bets against market volatility creating more volatility which lead to a faster unwind in those bets. Selling forced selling and this loop brought markets down quickly.
Now, Trump has made it a habit to brag about the stock market’s rise since his election and cite this rise as an endorsement of his economic policies. Certainly investors are enthused about lower taxes. Much of the economic fundamentals — strong job growth, above trend GDP growth — however, were laid during the Obama administration. No one president can determine the economy’s fate in either direction.
Critics will note that Trump taking credit for the stock market on the way up requires him, in a sense, to deal with the blame on the way down. But if the latest decline in the stock market is divorced from the economic boasts Trump has so often tied his stock market commentary to, then this decline isn’t really about him at all. This decline, in other words, is not on him.
And so in his way, Trump’s tweet Wednesday put to rest the notion that stocks lost 4% in a single day because American workers are making more money. It was always sort of a silly excuse.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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