As Hurricane Michael marches up the East Coast, a devastating momentum meltdown is ripping through the stock market.
A barrage of selling slammed stocks Wednesday on the heels of several failed bounce attempts earlier this week. As the dust finally cleared, we were left with the worst drop since the February correction.
The Dow Jones Industrial Average tumbled more than 800 points on the day to close down 3%. But once again, tech and momentum stocks absorbed some of the worst damage. The Nasdaq Composite finished the day lower by more than 4%. Many individual names fared much worse.
You can run and hide. Or you can follow me down the rabbit hole as we attempt to make sense of this manic market.
Still with me? Good.
Here’s everything you need to know this morning:
The S&P 500 cratered more than 3% yesterday to cap off five straight days of selling. That’s the index’s longest losing streak in two years.
After posting new all-time highs in September, the S&P is fast approaching its 200-day moving average for the first time since May.
Volatility is roaring back in a big way.
The CBOE Volatility Index (VIX) has more than doubled in over the last week, Business Insider notes.
We’ve experienced a few volatility spikes so far this year, most notably during the winter correction when the VIX posted its highest reading of the year. While it’s approaching its April levels, it has a long way to run before matching its February spike.
Meanwhile, Trump is lashing out at the Fed.
As if this market meltdown wasn’t stressful enough, the president is already launching a war of words against his own Fed chair, saying the Fed has “gone crazy” by moving forward with its plan to raise rates.
These aren’t the reassuring comments investors are looking for right now…
Turning back to the carnage, we’re confronted with strong selling in the once-mighty FANG stocks.
“A basket of stocks tracked by Bank of America Merrill Lynch, comprised of Facebook Inc., Google parent Alphabet Inc., Amazon.com Inc. and Netflix Inc., fell as much as 4.1 percent for its biggest loss since late July,” Bloomberg reported yesterday afternoon. “The group has plunged about 8 percent in the past five sessions, sparked by a selloff in Treasuries that sent yields surging to multi-year highs.”
Netflix Inc. (NASDAQ:NFLX) is the biggest loser of the bunch, dropping more than 8% yesterday.
The drop delivered Netflix stock back to its 200-day moving average for the first time since 2016.
Noise from the tech rout also drowned out a historic retail stock’s last gasps.
While investors watched their beloved tech stocks implode, Sears Holdings Corp. (NYSE:SHLD) shares circled the drain as the company prepares to file for bankruptcy.
Shares fell nearly 17% to close the day under 50 cents.
A surprise acquisition props up one of our long-term plays during an ugly crash.
Imperva Inc. (NYSE:IMPV) was one of the best performing stocks on the market yesterday, jumping almost 28% after private equity player Thoma Bravo announced it would aquire the company at a hefty premium.
The news helps put this position back in the green form our most recent buy. It’s a bittersweet prize. But we’ll take it given the market conditions.
Finally, futures remain in the red as world markets respond to yesterday’s selloff.
We’ll need to see buyers step up and defend these levels today as the market approaches important support zones. I’ll keep you posted…
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