More blood could spill | S&P 500 -2%, Nasdaq -2.3%, VIX +17% in three days | But Amazon delivers the goods, inspiring dip buying after hours

The closely watched and traded Nasdaq-100 $NASDAQ 100 Index (.NDX.US)$ fell 2.3%. The broader S&P500 $S&P 500 Index (.SPX.US)$ shed 1.9%, marking their biggest one-day drops since September 3. The Aussie share market $S&P/ASX 200 (.XJO.AU)$ is down 1% at the open. It’s biggest drop in a week.

We have been speaking about the big warning signs for markets to pull back for some time, covering this again yesterday. It’s almost as if markets have been driving down a metaphorical freeway with signs coming toward us, saying “steep descent ahead.” Then bam—the market’s fear gauge, the VIX, rose to its highest level since August, up 17% in three days to 23, as options traders bet more downside could be ahead. The last time the VIX rose this fast was in August, before markets fell 10% and then recovered. So you might expect shorting to increase and profit taking for now, till perhaps maybe next week once we have certainty in markets (post the Fed meeting).

Firstly, remember the market is forward-looking. Although from the outset big tech companies like Apple $Apple (AAPL.US)$, Meta $Meta Platforms (META.US)$, and Microsoft joined $Microsoft (MSFT.US)$ the S&P 500 in reporting stronger-than-expected profits, they’ve all guided for less revenue growth ahead. This is why markets are under serious pressure, with the Nasdaq down 3.5% in three days. Microsoft $Microsoft (MSFT.US)$ shares lost 6% overnight. Meta $Meta Platforms (META.US)$, lost 4%. Traders and money managers are readjusting their books, preparing for slower revenue growth from the world’s biggest companies.

Thirdly, in some good news, Amazon $Amazon (AMZN.US)$ the world’s second-biggest cloud company, guided for stronger profits ahead, while it will devote $75 billion in capital spending - mostly tech infrastructure. And this inspired Amazon $Amazon (AMZN.US)$ shares to rise and inspire dip-buying across the board after hours. Including in Nvidia\ $NVIDIA (NVDA.US)$ with its shares up 1.2% after hours which suggests it will recoup some of the 4.7% lost in normal hours. Meanwhile, Apple $Apple (AAPL.US)$ shares after hours did not fall as much as some expected, it’s down 1.8%

Well the good news is the US dollar is lower. So although Aussie share market opened 1% $S&P/ASX 200 (.XJO.AU)$ lower on Friday - and is now 1.6% in the week. I think broad selling could slow, as the narrative seems that US can cut rate cuts next week, just days after the US election. And this will be a positive for equities and commodities. And the Aussie share market,

But today - iron ore miners, BHP $BHP Group Ltd (BHP.US)$ and RIO $Rio Tinto (RIO.US)$ could come under pressure again with iron ore prices seeing their biggest pull back in a week, down 0.9% today. Seaborne iron ore prices are up 17% from their lows thought as traders are bullish China will buy more of the key steel making ingredient. But caution might be expected ahead of certainty from China’s import data which is due next week. We really want to see evidence China is buying more Before their prices can keep moving up - iron ore is up 17% from September. Copper, is up 10% from July….

We’re also watching coal stocks. Whitehaven Coal $Whitehaven Coal Ltd (WHC.AU)$ up 25% from September, Yancoal $Yancoal Australia Ltd (YAL.AU)$ is up about 20% over the same time. New coal data is out from China next week. You want to see signals. China has increased its record buying of Australian before coal prices move up. Coal prices are now up 25% from its January.