The NASDAQ has experienced its worst three-day rout since the April 2025 tariff induced selloff. The broader market, however, has advanced. Bit coin continued its decent falling to the lowest levels since October 2024. Its value has been almost cut in half since October. Silver fell another 13%. Unlike in April, there is no obvious catalyst for the current selloff.
Unlike the last three or four years, the recent decline is in all things related to AI and whether or not the massive investment in this sector will pay off. The latest decline has wiped out over $1 trillion in the NASDAQ, partially the result of a massively imbalanced market that has pushed valuations in this index to the highest levels since the 2000-dot-com peak according to Bloomberg.
Bloomberg wrote “it has been a tough week for investors who were heavily exposed to the part the market that led the upside.” Given 40% of the S & P 500 is concentrated in just ten stocks and one sector, many are feeling considerable pain.
Commenting further on bitcoin, and placing the current plunge into perspective, according to Bloomberg, the cyber currency has had five substantial bear markets since 2011 with the average drawdown of 80%. The smallest was 72%. If this cycle hits that threshold, the token would fall to about $35,200.
Yesterday the JOLTS Job Openings data was released. Openings unexpectedly fell in December to the lowest level since 2020. The statistics were lower than any published estimate. The data did not indicate massive layoffs but just a continuation of the status quo of a benign hiring and firing environment.
Treasuries rallied across the curve with greater gains in the “short end” causing the yield curve to yet again steepen to around the greatest slope in four years.
Speaking of which, fears are rising, a crowded hedge fund trade risks a rapid unwind if Warsh’s call to reduce the balance sheet comes to fruition which may then cause a rapid rise in yields for longer dated Treasuries.
What will happen today? After the close AMZN posted earnings that were regarded as “mixed” and included a “huge AI buildout” sending shares initially lower by 12%. Premarket they are off about 9%.
Last night the foreign markets were up. London was up 0.17%, Paris up 0.02% and Frankfurt up 0.53%. China was down 0.25%, Japan up 0.81% and Hang Seng down 1.21%.
Futures are up about 0.5%. Bitcoin broached about $60,000 in early morning trading only to rebound to around $64,000. The 10-year is off /532 to yield 4.21%.
