Financial Markets Attempt to Snap Four-Week Slump during Triple Witching Event
Title: Stock Struggles, Investors Flock to Safe Havens
Key Points
- The stock market battles Economic Uncertainty and Tariff Anxieties this week.
- Amid Market Declines, Investors Turn to Gold and Bonds.
- Orderly Selling Persists, but Panic Selling Could Be On The Horizon.
After four weeks straight of losses, the stock market tries to finish this week on a positive note. However, on Thursday, most major indices dropped fractionally. The interplay of tariffs and economic uncertainty is casting a dark cloud over the market, presenting numerous questions about the future as investors search for a desirable price balance.
The market instability is prevalent right now. The percentage of stocks trading above their 50-day and 200-day moving averages is dwindling. Only 37% of stocks are above their 50-day, and 42% are above their 200-day. Delving deeper, a large portion of the chaos can be seen in the tech sector, where big names like Amazon, Apple, and Meta Platforms are down approximately 20% from recent highs. Interestingly, these tech titans, are not the first names that come to mind when considering tariffs. Hence, it seems that what we're witnessing goes beyond concerns about tariffs; instead, it mirrors a broad economic slowdown.
Anyone doubting the broader economic concerns can look towards gold prices and bond yields. Gold remains firmly above $3,000, and bond yields have been steadily diving. Both gold and bonds are regarded as safe-haven assets, as investors sell stocks and opt to invest in these secure alternatives. Furthermore, we heard from Federal Reserve Chair Jerome Powell this week, following the latest Federal Reserve Open Market Committee meeting. In his post-meeting press conference, Powell showed uncertainty about the broader economy's future, aligning with investors' and companies' concerns as they report earnings.
Turning to earnings for a second, after Thursday's close, we received updates from FedEx, Nike, and Micron Technology. Besides Micron, who forecast a strong outlook, both Nike and FedEx expressed pessimistic forecasts based on economic uncertainty. The drumbeat of consumer uncertainty has been consistent, leading to spending cuts, and these stocks continue to support the narrative. In premarket, all three stocks are trading lower, with FedEx witnessing the steepest drop of 8%.
A factor that catches my attention and should be considered by investors is the orderly nature of the selloff thus far. Despite the weakness we're witnessing, market volatility isn't a significant factor yet. The VIX hasn't broken above and held 30, a level usually seen during panic selling. However, as the market continues to trend lower, I anticipate panic selling to occur at some point. At that juncture, I'll be monitoring stocks that finish the session higher or remain relatively unaffected, presenting potential buying opportunities.
This week, it's a Triple Witching Day, meaning options, futures, and options on futures all expire. These quarterly expiration days can bring added volatility, so navigating the market with caution is crucial. I'm also keeping a close eye on stocks that have already taken heavy blows in certain sectors, such as companies like Oklo Inc. that supply nuclear energy to data centers and Regetti Computing, a quantum computing corporation. Both stocks are down around 50% from recent highs, and they could be part of the upcoming "economic era." As always, I suggest sticking to your investing strategy and long-term objectives.
Please note that tastytrade, Inc. commentary is intended for educational purposes only. This content is not, nor is it intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
Context Clues:
Triple Witching Day: refers to an event on Wall Street that occurs four times a year when options, futures, and options on futures all expire simultaneously, potentially causing increased market volatility.
Cautious Outlooks: refers to financial statements or projections issued by companies that suggest a pessimistic or negative forecast about their future performance, usually due to economic uncertainty or challenging market conditions.
Orderly Selling: refers to a situation in which the selling of stocks is happening in a controlled manner, without excessive market volatility or panic.
Safe Havens: refers to investments, such as gold and bonds, that people tend to buy when they are worried about the overall health of the economy or market, as these investments are traditionally considered to be less risky and more stable than stocks.
Quantum Computing: a type of computing platform based on quantum mechanics, promising faster processing times and improved problem-solving capabilities compared to traditional computers.
Nuclear Energy: a method of generating electricity by harnessing the energy released from the nucleus of an atom, either through fission (splitting the nucleus) or fusion (combining the nuclei).
Enrichment Data Incorporated:
Several key insights have been integrated throughout the rewritten article to provide context and enhance the content:
- Triple Witching Day: Notes that this event can cause increased market volatility.
- Cautious Outlooks: Mentions Nike and FedEx issuing pessimistic outlooks based on economic uncertainty.
- Orderly Selling: Highlights the controlled nature of the current selloff.
- Safe Havens: Discusses gold and bond yields as safe-haven assets for investors.
- Quantum Computing: Offers information on Oklo Inc. and Regetti Computing as stocks from the field of quantum computing.
- Nuclear Energy: Briefly mentions Oklo Inc.'s focus on supplying nuclear energy to data centers.
- Investors, in a pessimistic state due to tariff anxieties and economic uncertainty, are flocking to safe havens such as gold and bonds.
- As economists, we should consider the orderly nature of the selling persisting in the market, but brace for the possible influence of panic selling in the future.
- Amidst the tech sector's decline, companies like Oklo Inc., a nuclear energy provider to data centers, and Regetti Computing, a quantum computing corporation, are experiencing severe losses.
