{"id":12296,"date":"2024-11-16T00:03:17","date_gmt":"2024-11-16T00:03:17","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2024\/11\/16\/tech-stocks-plunge-what-this-means-for-investors\/"},"modified":"2024-11-16T00:03:17","modified_gmt":"2024-11-16T00:03:17","slug":"tech-stocks-plunge-what-this-means-for-investors","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2024\/11\/16\/tech-stocks-plunge-what-this-means-for-investors\/","title":{"rendered":"Tech Stocks Plunge: What This Means for Investors"},"content":{"rendered":"
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\u201cThe economy is not sending any signals that we need to be in a hurry to lower rates.\u201d These words from Chairman Powell impacted the stock market much more than this week\u2019s inflation data.<\/p>\n

The stock market started selling off on Thursday afternoon and continued to do so Friday, with the broader stock market indexes closing lower. The Dow Jones Industrial Average<\/strong> ($INDU) closed down by 0.70%, the S&P 500<\/strong> lower by 1.32%, and the Nasdaq Composite<\/strong> ($COMPQ) lower by 2.2%.<\/p>\n

It\u2019s also options expiration Friday, which generally means increased volatility. The Cboe Volatility Index<\/strong> ($VIX) gained 12.79% on Friday, closing at 16.14. That\u2019s a big jump from earlier in the week.<\/p>\n

Nasdaq\u2019s Fierce Selloff<\/h2>\n

The Nasdaq experienced the biggest drop of the three indexes. The chip makers got smoked. Applied Materials<\/strong> (AMAT), the largest US chipmaker, was down 8.76% on a disappointing revenue forecast. Nvidia<\/strong> (NVDA) was down over 3%, Micron Technology (MU) was down almost 3%, and Intel<\/strong> (INTC) fell 1.70%.<\/p>\n

The daily chart of the VanEck Vectors Semiconductor ETF (SMH) gives a clear picture of the semiconductor industry.<\/p>\n<\/p>\n

FIGURE 1. DAILY CHART OF THE VANECK VECTORS SEMICONDUCTOR ETF (SMH). The sharp selloff in semiconductor stocks resulted in a technical weakness in the chart of SMH. It\u2019s close to a support level, while its SCTR score, MACD, and relative strength with respect to the S&P 500 weaken.<\/span>Chart source: StockChartsACP. For educational purposes.<\/span><\/em><\/p>\n

Although SMH is still within the sideways range (grey rectangle), it\u2019s very close to the bottom of the range, which aligns with the 200-day simple moving average<\/a> (SMA). The StockCharts Technical Rank<\/a> (SCTR) score is at a low 29, the moving average convergence\/divergence <\/a>(MACD) indicates a lack of momentum, and SMH is not outperforming the S&P 500 like it once did.<\/p>\n

Looks like investors are rotating away from semiconductors, either taking profits or investing in other asset classes \u2014 but which ones? It\u2019s certainly not healthcare stocks, which also got pounded on Friday. Perhaps cryptocurrencies. However, there\u2019s more brewing beneath the surface.<\/p>\n

The Yield Rally<\/h2>\n

The economy is still strong\u2014retail sales data shows that consumers continue to spend, which is pushing Treasury yields higher. The 10-year US Treasury Yield Index ($TNX) closed at 4.43% (see daily chart below<\/a>). TNX has been trending higher since mid-September and since the end of September has been trading above its 20-day SMA.<\/p>\n<\/p>\n

FIGURE 2. DAILY CHART OF THE 10-YEAR US TREASURY YIELD. Treasury yields have been on a relentless yield since September. A stronger US economy would keep yields higher.<\/span>Chart source: StockChartsACP. For educational purposes.<\/span><\/em><\/p>\n

Fed Chairman Powell and Boston Fed President Susan Collins\u2019 comments lowered the probability of a 25-basis-point interest rate cut in the December FOMC meeting. According to the CME FedWatch Tool<\/a>, the probability is now 58.2%. It was close to 70% on Thursday, before Powell\u2019s speech.<\/span><\/p>\n

The relentless yield rally may have been one reason the Tech sector sold off. Higher yields don\u2019t benefit growth stocks.<\/p>\n

Dollar\u2019s Roaring Rally<\/h2>\n

One asset class that is gaining ground is the US dollar. When the words \u201cDollar sets 52-week high\u201d appear in my predefined alerts dashboard panel, it\u2019s something to analyze. The US dollar<\/strong> ($USD) has been in a relatively steep rally since October (see chart below<\/a>). With a strong US economy and the Fed indicating a more neutral stance in their policy decisions, the dollar could continue to strengthen.<\/p>\n<\/p>\n

FIGURE 3. DAILY CHART OF THE US DOLLAR. The dollar has been in a roaring rally since October. A strong US economy supports a strong dollar.<\/span>Chart source: StockChartsACP. For educational purposes.<\/span><\/em><\/p>\n

At the Close<\/h2>\n

With the exception of the Dow, the other broader indexes have fallen to the lows of November 6, the day after the US presidential election. The broad-based selloff could continue into early next week. There\u2019s not much economic data for next week, but Nvidia will announce earnings after the close on Wednesday. That should shake up the chip stocks.<\/p>\n

If you have cash on the sidelines, there could be some \u201cbuy the dip\u201d opportunities. However, because there are some dynamics between stocks, yields, and the US dollar, the three charts should be monitored to identify signs of a reversal. When you\u2019re confident of a reversal, jump on board.<\/p>\n

If you want to be notified of new articles published in the ChartWatchers blog, sign up on this page<\/a>.<\/span><\/p>\n

End-of-Week Wrap-Up<\/h2>\n

S&P 500<\/strong> down 2.08% for the week<\/strong>, at 5870.62, Dow Jones Industrial Average<\/strong> down 1.24% for the week<\/strong> at 43,444.99; Nasdaq Composite down 3.15% for the week<\/strong> at 18,680.12
\n$VIX<\/strong> up 8.03%% for the week, closing at 16.14
\nBest performing sector for the week: Financials<\/strong>
\nWorst performing sector for the week: Health Care<\/strong>
\nTop 5 Large Cap SCTR stocks<\/a>: <\/span>Applovin Corp.<\/strong> (APP); <\/span>Palantir Technologies<\/strong> (PLTR); <\/span>Summit Therapeutics <\/strong>(SMMT); <\/span>MicroStrategy Inc. (MSTR)<\/strong>; <\/span>Redditt Inc.<\/strong> (RDDT)<\/span><\/p>\n

On the Radar Next Week<\/strong><\/h3>\n

October Housing Starts
\nNovember Michigan Consumer Sentiment
\nFed speeches
\nNvidia earnings<\/p>\n

Disclaimer:<\/em><\/strong> This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.<\/em><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

\u201cThe economy is not sending any signals that we need to be in a hurry to lower rates.\u201d These words from Chairman Powell impacted the stock market much more than this week\u2019s inflation data. The stock market started selling off on Thursday afternoon and continued to do so Friday, with the broader stock market indexes […]<\/p>\n","protected":false},"author":0,"featured_media":12297,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-12296","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/12296","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=12296"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/12296\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/12297"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=12296"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=12296"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=12296"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}