URGENT UPDATE: The stock market is experiencing a significant downturn, with major indexes poised to end the week in the red. As of Friday, October 27, 2023, the Nasdaq Composite has plunged over 4% this week, while the S&P 500 has dropped more than 2%. Investors are on edge as concerns mount over inflated tech valuations and the outlook for Federal Reserve interest rate cuts.
The market’s decline accelerated after the opening bell at 9:30 a.m. today. Here’s where the indexes stood shortly after trading began:
– S&P 500: 6,660.37, down 0.9%
– Dow Jones Industrial Average: 46,745.05, down 0.36% (−167.25 points)
– Nasdaq Composite: 22,710.64, down 1.5%
Investors are grappling with whether to buy the dip amid fears that recent optimism surrounding generative AI has led to unsustainable valuations. This week’s sell-off was triggered when Palantir reported earnings that, despite beating expectations, did not satisfy investor appetites. The stock has since dropped 13%, reflecting broader concerns about tech sector valuations, which many analysts believe have reached “nosebleed” levels.
David Rosenberg, president of Rosenberg Research, emphasized in a client note that “all of a sudden, we are starting to see some tech heavyweights fail to live up to investor expectations.” Meanwhile, the CEOs of both Goldman Sachs and Morgan Stanley have warned that a market correction could be imminent if these inflated valuations do not adjust.
As the market grapples with these challenges, voices on Wall Street are calling for a “buy-the-dip” strategy. JPMorgan‘s market intelligence team has expressed confidence, stating they will be purchasing dips until the end of the year. Glen Smith, CIO of GDS Wealth Management, remarked, “Some big tech stocks are on sale, and are presenting buying opportunities for investors,” highlighting the potential for significant returns in the current market landscape.
In a surprising twist, recent layoffs have spurred speculation about potential Federal Reserve rate cuts. Over 153,000 job cuts were announced in October, more than double the previous month, marking the worst October tally since 2003. This has increased the likelihood of a 25 basis-point rate cut in December to over 70%, according to the CME FedWatch tool.
Glen Smith noted, “We think this cooling keeps the Fed’s rate cut plans alive for December and potentially into early 2026,” adding a layer of complexity to the current market dynamics.
A critical level to monitor is the S&P 500’s 6,665, which represents its 50-day moving average. Technical strategist Katie Stockton from Fairlead Strategies warns that if the index fails to hold this support, it may face a deeper decline, potentially dropping to 6,500. Conversely, some strategists, including Fundstrat’s Mark Newton, see this weakness as an opportunity for a rebound as early as next week.
As of now, market participants are urged to stay vigilant and informed. The atmosphere is charged with uncertainty, making it crucial to watch these developments closely. The stock market’s fate could hinge on upcoming earnings reports and Federal Reserve decisions, making the next few days critical for investors and analysts alike.
Stay tuned for further updates as the situation develops.
