Here's Why Market Conditions Have Become Increasingly Unstable
Can Apple and Amazon save the day? Probably not.
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Earnings reports from Meta META and Microsoft MSFT failed to live up to expectations and triggered extremely ugly market action Thursday. Stocks trended down all day and accelerated even lower at the close bell.
The Nasdaq 100 QQQ lost 2.5%, and the mighty Magnificent Seven MAGS was pounded for a loss of 3.85%. Breadth was more than three-to-one negative, and over 270 stocks hit new 12-month lows.
Market conditions have been growing increasingly unstable for a while now due to election uncertainty, rising interest rates, economic worries, and concerns about valuation. Technically, the indexes have been holding up, but they have been unable to make progress recently, and rotational action has been taken in and out of smaller stocks.
The big-cap technology reports haven't been that bad, but expectations were high, and conditions were ripe for the reports to be sold. The big issue now is whether Amazon AMZN and Apple AAPL can turn the tide and provide support for the Magnificent Seven group.
Amazon is reporting a solid earnings beat of $0.29, but revenues are just in line. The stock is reacting positively and is up about 5%. However, as we saw Wednesday night from Microsoft, the key to these reports is guidance, and we'll have to see what Amazon says on its conference call.
Intel INTC also reported and is seeing a positive reaction so far, but neither of these two stocks is doing much to prop up the broader market so far.
Apple's AAPL results are very close to line, and the stock is down a bit more on the news. It is just an OK report, and guidance will be the key to the ultimate outcome.
The action on Thursday did some technical damage, and we'll have to wait and see until Friday whether the reports from Amazon, Intel, and Apple will bring in buyers, but the big problem is that the election is looming, and there will be some hesitancy to put on addition risk when the results are so uncertain. The worst-case scenario is an unclear winner and disputed results that drag out for days. The chances of that happening are not insignificant.
It is going to be tough for the Mag 7 to attract substantial buying interest, and that bodes badly for the entire market.
Have a good evening. I'll see you Friday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
