Pull back warning | Microsoft shares down 4% after hours. Meta down 3%. Guidance weaker than expected. No room for bad news from Bank of Japan, Apple or from Fed's PCE ahead
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Brace yourself for a potential big pullback.
Ideas & key takeaways
Ideas & key takeaways
– The volatility index, the VIX $CBOE Volatility S&P 500 Index (.VIX.US)$ spiked. The last time the VIX was this high, at 20, markets pulled back 6%.
– Microsoft $Microsoft (MSFT.US)$ shares fell 4% in after-hours trading, with Meta $Meta Platforms (META.US)$ down 3%. Markets don't like their revenue guidance levels. Most of the biggest companies in the S&P500 $S&P 500 Index (.SPX.US)$ are all in the red after hours, suggesting a possible pullback.
– There's now no room for bad news or surprises from the The Bank of Japan’s rate decision and outlook, Apple $Apple (AAPL.US)$ results and outlook, and the Fed's preferred inflation metric—PCE—all ahead. Any bad news or disappointment could upset markets that have just fallen onto shaky ground.
– TRADING AND INVESTING STRATEGIES? Consider taking profits, shorting, or keeping cash on the sidelines to buy stocks you like at cheaper prices if markets fall significantly. Notably, shorting trades and shorting ETFs are doing well in after-hours US trade, and gold is also holding up.
What’s going on, what could save the day, and is this your opportunity to adhere to the Warren Buffett method—buy stocks you like at cheaper prices?
Microsoft $Microsoft (MSFT.US)$ reported better-than-expected profits with its closely watched and all-important cloud-computing unit, Azure, posting revenue growth of 34%, slightly lower than its prior quarter’s growth. But this quarter, it sees its key division’s revenue rising only 31 to 32%, suggesting cloud revenue is slowing, so its shares fell 4% after hours.
Meta $Meta Platforms (META.US)$ shares also fell after hours, about 3.5%. It raised revenue 1% more than expected, growing at 20% YoY. But like Microsoft, Meta also guided for less revenue ahead than the market expected, seeing revenue between $45 to $48 billion. Still, Meta's stock is up 67% this year, and the thinking is it has more potential as its earnings are still growing. Meta is loved by most investment banks, which have the stock as a buy.
In normal hours, traders sold and shorted chipmakers, especially those without sticky Mag-7 clients like Nvidia $NVIDIA (NVDA.US)$ AMD $Advanced Micro Devices (AMD.US)$ shares fell almost 11%, SMCI $Super Micro Computer (SMCI.US)$ sank 33%, falling back to January levels, while the chip-king Nvidia only fell 1.3%.
So do you buy stocks now? Some investors will buy the dip now, but others will wait for next year. I personally think more pullbacks could come—here are 5 reasons that are snowballing at once, suggesting darker days ahead:
1. The market’s fear is rising to its highest level in two weeks, with the VIX at 20. Last time it rose to this level, the S&P500 fell 6%.
2. End-of-month profit-taking is normal around this time of year.
3. Technical indicators in the short term suggest markets have lost momentum and headed into a pullback, which could prompt shorter-term traders to short and take profits.
4. Rate cut bets were reduced overnight as more US data show the economy is stronger than expected. The Fed’s preferred inflation metric, PCE, is released tonight. If it shows inflation rising more than 0.3% in the quarter or 2.6% for the year, the interest rate cuts expected next week and in January and December might not happen, potentially pressuring stocks lower.
5. Today, the Bank of Japan meets to decide on interest rates, expected to hold at 0.25%. We’re watching their guidance and hints at what’s ahead. If there are signals of a potential BOJ rate hike, global stock markets could fall as traders remember the credit crunch concerns and tech pullback triggered by the last hike.
What else to consider
The Aussie market $S&P/ASX 200 (.XJO.AU)$ has only fallen 0.2% today, but it’s down for the second day and about 3% lower than its all-time high, with technical indicators suggesting a pullback could come.
But there’s always a bull market somewhere. Mineral Resources $Mineral Resources Ltd (MIN.AU)$ shares are up 15% today as Gina Rinehart’s Hancock Prospecting buys MinRes’s oil and gas permits for AUD$1.1 billion, signaling rising gas demand amid ESG issues.
JB Hi-Fi $JB Hi Fi Ltd (JBH.AU)$ shares are up 5% after Australian retail sales rose 5% YoY but fell month-on-month, with those numbers just out from the ABS. WiseTech shares continue to recover from their sell-off, with technical indicators suggesting its shares could move higher still, though WTC shares remain down 15% from their highs.
Tonight, watch Tesla $Tesla (TSLA.US)$ shares, as BYD $Boyd Gaming (BYD.US)$ surpassed Tesla EV sales for the first time. China’s BYD announced it sold more EVs than Tesla for the first time, with sales soaring 24% to US$28.2 billion in the quarter, more than Tesla’s US$25.2 billion in sales.
If markets pull back on BOJ or Apple $Apple (AAPL.US)$ news or PCE, it could present a chance to buy on the dip. Historically, markets have rebounded as they have over the last two years. The alternative is that if Apple’s earnings and outlook are stronger than expected and if the Fed’s preferred inflation gauge falls more than expected, then markets might push higher.
But consider the long term trend is up for markets. Supported by company earnings growing. And more than expected overall. Long-term investor and sophisticated investors would be noticing US earnings season is now over halfway through. So far, 286 companies have released results, and they’ve been far better than expected. This is supporting the share market over the longer term. US companies are up 10% in the quarter, far outpacing the average ASX200 company, which might be a wake-up call for some Aussies to consider investing in the US where the world’s biggest companies are.
Last but not least, gold is holding at its new all-time high, and so is Bitcoin $Bitcoin (BTC.CC)$ .
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Moon fairy 大炮仙 ❤ :
Ultratech : don't forget intel that stock carries weight on the tech sector which drives the train. the market hates uncertainty and this is going to be a crucial next two weeks