Liquidity Drain Sinks Stocks On February 12

By Michael J. Kramer of Mott Capital Management

Founder/CEO at Mott Capital Management, LLC • Feb 12, 2026 at 7:50 PM EST

Stocks fell sharply today, with the S&P 500 dropping nearly 1.6% and the Nasdaq 100 declining more than 2%. Today was also a settlement day, with $22 billion settling, so the sell-off wasn’t particularly surprising.

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Stocks fell sharply today, with the S&P 500 dropping nearly 1.6% and the Nasdaq 100 declining more than 2%. Today was also a settlement day, with $22 billion settling, so the sell-off wasn’t particularly surprising. Since the end of October, settlement days have been weak more often than not.

Next week may not be any better, with $65 billion due to settle on Tuesday, and another $24 billion on Thursday.

Suddenly, social media has decided that dispersion in the index is a problem, as stocks are starting to break down and post large moves. It’s a bit of a “no kidding” moment — where has everyone been for the past six months? I guess people are just now waking up.

The Dispersion Index has been trading near the upper end of its historical range for several weeks, so this is hardly a new development.

I don’t want to point out the obvious, but Walmart (WMT) is reporting results next, and this whole little spot-up, vol-up stuff is probably going to end in a not-so-pleasant way.

Last year, when this same thing happened, the stock fell 12.5%.

With the VIX 1-Day closing at 21.5, it wouldn’t be surprising to see the S&P 500 rally by around 1%. At these elevated IV levels, a sharp downside move in the SPX would be somewhat unexpected.

In addition, tomorrow is Friday and the start of a holiday weekend, which is often a period when volatility sellers step in, potentially adding support to the market.

Anyway, I will try to post something on Saturday. If not, have a good week.

More By This Author:

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