Markets Are Clearly Confused. The S&P 500 closed sharply lower on Wednesday, suffering its biggest one day lost since 2022 as tech stocks nosedived following underwhelming second-quarter earnings from heavyweights Alphabet and Tesla.
After the recent political machinations in America, with Trump in the ascendency, followed by the switch from Biden to Harris, the Trump trade got reversed. In Big Tech, the rotation from AI stocks has continued, as players like Google reportedly are spending even more Capax than expected investing in AI, without a clear uptick in revenue, while Tesla pushed out some of their new business plans, while reporting weaker sales revenue.
Then we have the prospect of US rate cuts now emerging in September, having at the start of the year priced in up to six cuts, a month ago considering a rise as inflation appeared more sticky, but now economic cracks may suggest a series of cuts soon.
And in China, data continues to be weak, after the recent conflab there did little to clarify Government support for the weak economy, with speculation rise that they will wait for the US election result.
And while rate cuts continued in Canada yesterday, and are expected in Europe, and the UK, in appears rate rises are more likely in Japan and Australia.
Finally, we have the normal summer thinner volumes, and then the prospect of the typically wobbly markets we often see in September and October, before a run up towards the end of the year.
So traders are going cautious, taking money off the table, and into safe havens, switching from the high tech bet, and watching for the next moves.
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