Stocks Swing in Every Direction as Rotation Spins Out of Control
With emotions high and eyes glued to the news, Netflix and other earnings, the market turns into a basket case.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Market has seen a surge in volatility over the past week as aggressive rotational action takes hold and investors contemplate the reaction to major earnings news. The key question is whether earnings reports from the likes of Netflix NFLX and other Magnificent Seven names will accelerate the sizable moves that have already taken place. Will there be a major shift away from narrow big-cap leadership as we move closer to a Fed interest rate cut?
Netflix issued a solid report on Thursday night, and a number of analysts have increase their targets, but Citibank summed it up by stating that while the numbers were good, expectations were high. We’ll see how the stock develops as it digests the news, but in very early trading on Friday morning, the stock is down about 1%
The biggest challenge that investors face right now is that rotational action of this magnitude is very inconsistent and random. We are seeing the Russell 2000 and the group's small cap exchange-traded fund IWM give back a big chunk of recent gains, but those gains were of historic magnitude. While it is possible that the recent jump will be totally wiped out, the greater likelihood is that it will continue after a nasty bout of volatility that forces many investors to grow skeptical and call it into question.
The Magnificent Seven names are struggling as well, with both Amazon AMZN and Alphabet GOOGL breaking below their 50-day simple moving average, but that may actually be helpful in lowering expectations before their upcoming reports in the next two weeks.
The assassination attempt of former president and current candidate Trump and the growing likelihood that Joe Biden will drop out of the race for president have helped to create a more emotional atmosphere that is impacting trading and fanning the flames of volatility. There has been a major shift in the political picture, and it has many repercussions for both stocks and bonds.
Early on Friday morning, there was a worldwide technical outage caused by a glitch in software provided by CrowdStrike CRWD. The problem has been identified, and a fix is being issued, but this is the sort of news that leads to more market instability and greater volatility.
It is very messy out there right now, and there will be plenty of news flowing in the next couple of weeks to keep it that way. The good news is that many stocks are being mispriced, and there will be some very good opportunities for patient investors and traders who work to find the best opportunities.
Despite the chaos the indexes are close to flat in the early going on Friday morning.
