Stocks are getting speed checked
A retail favorite failing to build momentum even when it “deserves” to, the most important part of the stock market being told it’s overheating, and the heads of banks warning of a broader pullback.
The stock market is facing a bit of a speed check.
That’s the message emanating from various key actors and assets, communicated in ways that range from subtle subtext, to somewhat fuzzy, to the extremely explicit.
Palantir Technologies is being sold hard on what are objectively good quarterly results: its ninth consecutive earnings beat and a boost to its Q4 guidance. The difficulty is, no matter how strong any results are, Palantir is always at risk of a “sell the news” event because of how darn expensive the shares are. (We saw something similar — a sell-off despite very good financials — in the wake of Micron’s earnings report in late September.) Bitcoin, another “id” asset, is also down 2.8% as of 7:25 a.m. ET.
The CEOs of Goldman Sachs and Morgan Stanley gave some vague warnings about the potential for a material drawdown in the stock market at an unspecified point in the future.
Korea’s exchange did a literal speed check on SK Hynix, issuing an “investment caution” on shares of the memory chip giant, which reported record quarterly results along with a stellar outlook last week. Basically, it’s a warning that the shares have gone up very fast, and if they continue to do so, the exchange may go on to limit margin trading in the shares or even halt the stock. Shares of SK Hynix had more than doubled since early September, but closed down 7% on Wednesday. As of 6:28 a.m. ET, every member of the VanEck Semiconductor ETF outside of Texas Instruments is down at least 1%, with memory chip seller Micron faring the worst, off 3.5%. Disk drive sellers Seagate Technology Holdings, Sandisk, and Western Digital are also getting rinsed in early trading.
A retail favorite failing to build on momentum even when it “deserves” to, the heads of banks warning of a pullback, and the most important part of the stock market being told it’s overheating, along with a filing showing that prominent short seller Michael Burry has bet that Nvidia and Palantir will tumble.
In and of themselves, any single one of these events probably doesn’t equal the SPDR S&P 500 ETF being down 1% in early trading on Tuesday. Collectively, under different circumstances, they might not be sufficiently potent for a sell-off of this nature.
But, as we discussed yesterday, the likes of Cboe and Goldman Sachs were flagging signs from the options market that traders were becoming perhaps a little overenthusiastic in their positioning.
If you go over a speed bump while driving 100 miles per hour, there’s an extremely high risk of damage to the car even though the obstacle itself isn’t that daunting. Similarly, relatively inconsequential catalysts can cause more market damage at times when exuberance has started to creep in.
And so begins another test for the “buy the dip” thesis.
