The View from 5th Avenue – 22 August 2022

A sobering day of red as the S&P (SPX) saw a 95% down day and the Dow (INDU) pitched a no hitter with a 100% down day (down over 640 points, though there are only 30 stocks in the Dow). We were watching for support levels of 4177 on the SPX and 12,900 on the NDX, neither of which held today. Next stop for the SPX is 4112 then 4079, and the NDX’s next stop is the 50dma of 12,346. Today’s weakness did not discriminate --- every sector was in the red. Semis were the worst performers led lower by NVDA (-4.6%) and ON (-5%) after Citi put out a negative report on chip makers. Palo Alto (-1%) reports after market today and Nvidia and Splunk (-2.8%) both report after the close on Wednesday. But the chip makers were not the only culprits ---Apple (-2.3%), Amazon (-3.6%), Microsoft (-3%) and Tesla (-2.3%), which make up a major chunk of the larger indices, also heavily contributed to losses. Amazon weakness was due to its battle with United Health (-0.7%) over Signify Health (+32%). Separately, Ford (-5%) was also crushed after a $1.7bn ruling in a pickup truck accident in Georgia. Aside from major equities moves, the other story was dollar strength (and EUR weakness) in which we see 120 as the next target. We were also keeping a close watch on the 10yr breaking 3%, an achievement which could now lead back to 3.25%. The Chicago Fed Nat Activity was positive this morning, a good sign, but this week will bring even more eco data (PMIs, GDP), as well as Jackson Hole on Friday. It seems as if the market is coming to terms with the fact that rate cuts are still far off. It's now a near 50/50 split on whether we get 50 or 75 bps next month. With the VIX up +16% but volumes down 13% today, the extreme moves were unsurprising. And also disconcerting. Though of the Mondays that fell 2% or more in the last 10 years, 75% had an up day Tuesday.