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2 Reasons Why The Stock Market Is Falling- It Ain’t Trade War Fears

2 Reasons Why The Stock Market Is Falling- It Ain’t Trade War Fears

The markets sure moves fast these days, the S&P 500 was down by nearly 6 percent this week! $1.1 trillion in market cap wiped off the S&P 500 over the past two days, and  $1.5 trillion for the week! So you think the trade wars totals will amount to that much? Unless this is really about something else.

What was the worst performing sector of the week the Techs! The XLK was down 7.1 percent this week. But the worst performing group over the past two days? Financials! Down 6.27 percent. All the big name banks down between 6 and 9 percent over the past couple of days.

Trade wars financials technology

XLU Price data by YCharts

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Trade War –  No Way

I know Nike reported results today, and they were strong, but Nike revenue from greater China in the fiscal third-quarter was nearly 15 percent, but still, Nike was up today.

You know how much business Morgan Stanely did in Asia in 2017?  Not much! Total revenue for the company was $37.9 billion, and $4.4 billion was in ASIA, not just China, 11.6 percent of total revenue. So not sure that the banks are getting slammed on this the trade war concerns.

2 Reasons Why

So there seem to be two things going on in the stock market today. One, risk is coming off the table in the big Techs that have had massive run-ups, and Facebook was the start of that. Amazon was down nearly 5 percent this week, Netflix 5.5 percent, and Microsoft 8 percent.

yields

Second, banks are falling because the market is telling us that the Fed is likely not to be as aggressive raising rates as the market had previously thought. The odds of 4 rate hikes this year diminished rapidly. Why? Because inflation is in check and pretty much a dead issue, look at wage growth, CPI, PPI and PCE data. Look at the yield curve. 10-year yields have fallen since Wednesday afternoon, and the dollar is weakening.

dollar

So we have an unwind of some crowded technology stocks, and a move out of financials.

 

Too Much Concentration In Two Sectors

So why is the market going down, well look! There are only three stocks in the top 15 companies in the S&P 500 that are not Tech or Financials. I know Amazon says consumer cyclical, but come on, it trades with the techs.  Remember at the beginning of the article I told you that the S&P 500 lost $1.5 trillion in market value this week. Well, $571 billion or 37 percent of that was in these 15 stocks.

(Data compiled using Ycharts)

More stock specific stuff over the weekend.

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Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.

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Tags: #sp500 #tech #technology #financials #banks #dollar #yield