Repricing 'risk' is part of what's going on; aside a seasonally weak time as well as the old adage (humerous) 'sell Rosh Hashanah and buy Yom Kippur', which I couldn't resist noting as we wish our Jewish friends Happy New Year.
And of course most market internals were correcting overall for months (with sector variations); but it's the 'variants' of the Covid-19 virus that's shaking a lot of bulls from their over-enthusiasm about the market most recently.
There is also the somewhat muted decline of a fund in China, which seems to be shored-up by Beijing, and may be a harbinger of a junk-bond collapse in China; primarily related to the (years overdue) coping with 'ghost properties'.
I don't know what comes next; but it does seem proximity to news is close. If today was an 'opportunistic' decline; perhaps the next is 'opportunistic' rally.
Apple is in everyone's eyes; and we've not had historically hysterical declines in this stock, which always makes it up later on. AAPL is about a 5th of NDX, so more than others, how it responds matters. The 'bar' has lowered for each Apple product annually (incremental rather than radical changes); but they've got enough products and services to balance out seasonal cellphone sales (it is a factor and part of why they don't break-out segments of revenue). So we'll watch it closely (everyone will); since this has been such a concentrated ..call it passive.. investment environment for the huge stocks, that it totally matters.
Rotation in defensive ways characterized Tuesday's session. There was very strong support for a Treasury Auction today; which might reflect capital now fleeing China (where possible) into U.S. Treasuries, after a borderline failure requiring Beijing's intervention, lest there be a full-blown 'junk bond' plunge.
Or fleeing Bitcoin; it dropped over 5000 (yes) today alone. Poor El Salvador, what a terrible decision to not only accept Bitcoin, but to invest in it. And now their President says he wants to buy the dip; probably doesn't realize 'funny money in Asia' is buying Treasuries and maybe selling crypto for the moment; doesn't mean it won't recover eventually; but I wonder if it relates to China risk in the junk bond area and concern of a 'Lehman moment' for the Chinese (if so a waterfall cascade could both drive money to safe havens and spread).
That was sort of a big story Monday in China (NY was closed); and surprised how it's minimized by financial media; perhaps trying to keep complacency as the dominate feature and not panic markets. However it was a big deal and is symbolic of the investments in 'ghost' buildings and cities in China.
The move into the momentum / FANG / Mega-caps ... they are generally not attractive investments, but are finding money managers hiding in them. So it's the higher they go the more risk that exists. Any responsible manager would be lightening-up on those as a percentage of holdings; rather than passively throwing more money into them. Not saying it has to be the precipice of an S&P decline because of just the 5 stocks dominating the move; but it should be since they distort the equity market and have done so for months. We'll probably get 'turnaround Wednesday' though; regardless of what follows.
Wall Street needs to come to grips with the economic realities of slow growth in a number of sectors, for reasons we've outlined for some time: seasonal is a part of it; but Covid is the driver. Similarly, a working vaccine that attacks all variants, and/or pills and more-effective monoclonal antibodies; can reverse a down market to up in a New York minute.
But we're not there yet; hence our warnings of shakeout or correction in huge cap momentum stocks (generally overpriced); with erosion in most already of course down (in some cases for 5-7 months). Some big institutional firms are downgrading their economic and/or earnings forecasts, and most of those are already negative (some all along) while others rightly recognize this could be a bit nastier because too many forecasters were assuming growth rates that, in a better Covid environment, might indeed have been feasible.
Meanwhile there are some minor stories today; including Apple's traditional September 'event', scheduled for next Tuesday. More important to some will be Apple Watch 7, especially if it includes 'blood/sugar' or 'blood pressure' to significantly enhance their focus on 'health' features. Those are not technically easy achievements; especially BP without a 'cuff'; so let's see what we get.
As to iPhone 13, it will be more like a 12's', with iPhone 14 likely notably with redesign elements. Despite low expectations for iPhone 13, it will grow with a meaningful improvement in 5G (true SOC finally, from Qualcomm) and faster WiFi 6; as well as the usual processor and camera improvements. But what they already offer is very fast, and the cameras quite good; so how to figure a 'demand attraction' is tough; unless one owns an iPhone a couple series back or routinely gets one every year.
Oh... Ford has snagged Apple's Project Titan Chief engineer (the Apple Car); as Doug Field is well regarded as an autonomous driving expert and so on. I would not be surprised if - contrary to presumptions Apple gave up on it - this move is made with Apple's blessing. Not sure; but Apple is said to talk to a few automakers regarding what loosely is called 'Apple Car'; Toyota too.
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