Last Night's Market Recap
S&P 500 - Heatmap
Overnight – “Buy the dip” playbook gets thrown our as economy deteriorates
The “buy the dip” playbook was nowhere to be seen overnight as Nvidia’s rebound faded, as the increasing weight of leading recession indicators continued to stack up
Yesterday US investors returned from the Labor Day holiday, on the back of disappointing manufacturing activity data that fueled worries over the economic outlook. Today’s data didn’t help the situation with labour market data on Job Openings fell more than expected in July to 7.67 million from a downwardly revised 7.91 million in June, pushing the ratio of vacancies to unemployed to 1.07-to-1, below pre-pandemic levels, adding to the body of evidence that the labour market is not only looser than pre-pandemic but is continuing to cool and potentially now at a faster pace.
The recent string of worsening economic data is spooking investors, normally more than willing to “buy the dip” in the face of any sell off this year.
Nvidia attempted a recovery, but was surprisingly met with sellers, as investors were keen to not give away their profits after yesterdays 10% drop, the largest single day fall of any company in history (in dollar terms). Analysts and investors are increasingly digging below the surface to find cracks in Nvidia, including the recent discovery that Microsoft is responsible for 20% of their revenue, a huge single client risk
The seasonal weakness of the US stock market in September is a significant risk, especially in an election year, where the correction is FAR more pronounced
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The Day Ahead
ASX SPI 7940 (+0.01%)
The local market will have difficulty finding a positive catalyst today as yesterdays poor GDP numbers showed structural weakness in the private sector of the Australian economy, with positive growth only achieved due to Government spending and migration.
Adding to this, the public feud between our Reserve Bank and the Federal Treasurer will likely force Gov. Michelle Bullock to talk up inflation risks as the Federal Governments irresponsible and cheap fiscal policies make the Central Banks job infinitely harder.
We still remain of the view that the materials sector has lead the “economic slowdown” trade, the damage is done and the sector will start to form a base. The real risk remains in the banks, Consumer Discretionary and tech stocks which remain at valuations only justified in high growth environments
