Yesterday, We Had the Rotation. Today, There’s No Place to Hide
Yesterday’s problem was the chips. Today’s problem with interest rates affects everyone. Here’s how I’m handling my trading.
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The market is acting poorly on Wednesday with the Dow down 860 points, or 1.6%, and breadth at just 35% positive. Semiconductors are under severe pressure again with the group losing 3.7%. We now have the same number of new highs as new lows.
What is different from Tuesday is that there is no rotation to absorb it. Yesterday the chips fell apart, and money moved into pharmaceuticals, insurance, and consumer names. The Dow gained 537 points while the semiconductor index dropped 4.5%. Today everything is going down together.
Why the Rotation Stopped Working
The reason for the shift is that the fear has changed. Yesterday’s problem belonged to the chips. China is entering the memory business, pricing power is under threat, and the estimates supporting the AI buildout are being questioned. Those are serious issues and they are confined to one part of the market, which is why money had somewhere to go.
Today’s problem belongs to everyone. There appears to be genuine fear of a rate hike this afternoon, and a rate hike does not hit a sector. It reprices every valuation in the market at the same time. When the worry is macro rather than sector-specific there is no group to rotate into, and the selling gets indiscriminate.
The Odds Have Moved Fast
The market has been repricing this meeting at remarkable speed. Hike odds sat near 11% in the middle of the month, ran to the high 30s by the July 24 weekend, and were around 31% Tuesday night. Oil at $100 did that, even though the June inflation reading actually cooled.
The last policy move was a cut in December 2025 that brought the funds rate to its current range. A hike this afternoon would be the first of the cycle and a reversal of direction, delivered at Kevin Warsh’s second meeting by a chairman who has deliberately declined to signal anything about the path ahead.
That is why a one-in-three probability produces this kind of action. It is not just a quarter point. The issue is what that quarter point will lead to if there is a hawkish pivot.
The flip side is that a hold becomes a relief event, but the dissent count is going to be the focus and the tone of Warsh’s press conference will likely lead to some big swings.
Game Plan
I have no interest in guessing how the next several hours sort out. The decision comes at 2 p.m., the press conference follows, and Microsoft (MSFT) and Meta Platforms (META) report after the close. That is three binary events in four hours. I view this as entertainment rather than something to bet on.
What I am doing is watching which names on my list hold up while the market takes its hits. The stocks that go down less than the market on a day like this are telling me something, and that information is worth more than anything I could gain by buying before the Fed speaks.
If the selling continues after the news is out, the entries improve. Days like this create opportunities. They do not create them while they are happening.
At the time of publication, DePorre had no position in any security mentioned.
