Rise and shine everyone.

Yesterday was quite the day. At one point, the market cap of US equities was down by about $2T. One knock and quite a bit of the market came tumbling down. This is exactly why the narrow leadership has been so troubling. We have investors and traders all piling into the same set of stocks. For many hedge and leveraged funds, it was about selling other parts of the market as well to balance their books against the big tech sell-off.

Nvidia topped their previous record of the deepest drawdown of any company, ever. The stock price closed below its 200-day moving average for the first time in 2 years.

Markets are bouncing back somewhat this morning. In fact, apart from Nvidia, we saw quite a few of the AI names also recover during the course of the day. Large Cap value actually closed in the green.

But the questions surrounding Nvidia’s valuation aren’t going away. Suddenly everyone’s a fundamental investor! I doubt we will see a violent bounce back from the sell-off yesterday. And we may see some follow through as well, as the market starts to recover and some people take their profits and run for the hills. This kind of sell off is scary, and it makes for a poor market environment.

If anything though, this may mean that the market now starts to broaden out. Investors have had too many eggs in one basket for too long, and this could be a wake-up call to diversify some of that exposure.

The US Dollar sold off quite a bit yesterday. But then we heard from President Trump. The big news this morning is that the President is proposing sanctions on semis, chips, pharma, and certain metals such as steel, aluminum, and copper. Up goes the USD once again, and that too ahead of tomorrow’s Fed meeting. Any thoughts of a cut just flew out the window.

Chart of the Day - Consumer spending has been improving since 2022 lows

What we’re watching

• Price action in AI and tech stocks

• We don’t have much macro data today but, we do have a solid set of large cap earnings - GM, Boeing, Starbucks, and Lockheed Martin.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)