Stock Market Weekend Report - 4|21|24

It has been a painful April and we just saw a horrific Friday for the technology stock. 

What happened to the market?

On Friday, Nasdaq stocks got hammered, particularly semiconductor stocks were decimated. NVIDIA lost 10%, SMCI lost 23.14%, all other chip stocks also got hammered. Also, many other big tech big tech stocks were hit hard. Money started moving to NYSE stocks viz. financials, energy etc. So, what contributed to the collapse? The disappointing earnings from ASML and projection by TSMC. Taiwan Semiconductor (TSM) is the World biggest semiconductor manufacturer that makes chips for other companies had a great quarter. However, stock fell because the company showed some warning signs about slowing demand in the global semiconductor market. But the company also said that the AI business is booming and it expects AI server processor sales should double this year and grow at a 50% compounded annual growth rate through the next five years. Netflix (NFLX) Netflix beat estimates on the top and bottom lines and offered a reasonable guidance for the second quarter. But the company said it would no longer report quarterly subscriber numbers starting next year. And that was not appreciated by Wall Street.

On Monday, U.S. retail sales rose more than expected in March, jumping 0.7% vs. 0.3% expected. This made investors little nervous to renewed inflation fears. The Federal Reserve statements that tempered expectations for rate cuts amid sticky inflation and no rate cut possibly till September. There was no major Geopolitical news, Bond Yields also trended down on Friday but for the week it went up pretty high. The S&P 500 is off more than 5% off its 52-week high, and Nasdaq Composite fell 5.5% only this week and down 7.6% from its all-time high. This was the fourth straight down week for Nasdaq, its longest negative streak since December 2022. It also marked the Nasdaq’s worst weekly performance since November 2022. 

So, what changed on FRIDAY that the market was decimated?

In my knowledge, no such major news that came except SMCI said it will release its Q1 results on Tuesday, 4/30. It did not pre-announce, hence Wall Street thought it as negative and the stock got smacked over $200. That's really strange! Well, the fact "Friday was the expiration for monthly and quarterly stock Options and Futures". So, I have no doubt in my mind that it looked like a coordinated attack by the big players, short sellers to take advantage of the huge options market. Since stock market was already struggling with multiple negative news it was a perfect storm for those folks. Moreover, many intra-day rally attempts had failed in the previous few sessions. So, basically everything was brewing up to bust. But the way the stocks were brought down and the Indexes got hammered without any significant news gives me the belief that's the truth. But please note that it’s just an opinion, not a fact!

As I said on my WhatsApp group, When market goes down or a stock is hammered or a sector is hammered there will always be talks on the media that the Sky is falling and when it goes up they will say it would go to stratosphere! I have seen this repeats every few years. Some major talks were in 2000, 2008-09, 2018, 2020, 2022 and so on. Whatever it is, as a retail investor we do not have any control. We have to accept that it's part of investing and move on. That has been the history and we the retail investors just can’t  change anything. Only what we can do is rethink our strategy. So, should we sell all equities and run for the hills? Personally, I do not think so. Of course, there is no reason to be a dare devil in such a market. But one has to understand his/her own strategy and do what is good him/her. 

So what's next?

The good news is that several tech giants will release earnings this week as follows:

TUE, 4/23: Tesla (TSLA): I am not optimistic about Tesla’s earning. But I would like to see how bad it gets. This weekend Tesla has further cut the price of various models by $2000. Also, it can be noted that the company is laying off 10% of its workforce. 

WED, 4/24: META: I am expecting good earnings from META.

THU, 4/25: Microsoft (MSFT), Google (GOOG): I am expecting good earnings from these two tech giants, particularly Microsoft. 

But please remember that good earnings this quarter is not enough for the stocks to go up. More importantly, their guidance for next quarter is the KEY. If guidance is not good then stock will sink, but if guidance is good then stock should fly. We may see some potential rallies on these big tech stocks and Nasdaq with caveat that guidance is good. If market falls further then one must think to hedge the portfolio from further deterioration. 

Economic News

WED, 4/24: New Home Sales.

THU, 4/25: Q1 GDP (this may be market moving event), Pending Home Sales.

FRI, 4/26: PCE Index (this may be market moving event).

Stock to watch this week

TSLA, META, MSFT, GOOG, NVDA, SMCI, NFLX, LAZR

Have a good rest of the weekend! Let's hope to see some turnaround this week...