Yesterday’s stock market selloff felt like a roller coaster, starting slowly than accelerating through the day. A drop that started in large cap and technology stocks broadened out, particularly in the last two hours of trading where even a lot of stocks that had been up early in the day found themselves down by the close. It occurred to me later in the day on review that if margin calls started going out in the afternoon, traders may have started selling into whatever had a bid where they could raise cash quickly, ie dumping their winners.
The stock market selloff continued through overseas markets overnight. The Nikkei lost 3.3%, the Hang Seng fell 1.7%, the CAC has sunk 2.0%, the Dax is down 1.25%, and the FTSE has fallen 0.5%. Commodities are also under pressure with Crude Oil down 1.5% and Copper down 0.5%. Interestingly, precious metals have not seen an inflow of capital into defensive havens. Quite the opposite actually, Silver is down 5.4% and Gold is down 1.9%. Cryptocurrencies are getting smashed with Bitcoin down 2.5% and Ether down 6.1%, which could be a combination of reduced appetite for risk and traders selling winners to meet margin calls.
US index futures are currently trading flat to down 0.4%, digesting yesterday’s losses of 3.6% for the NASDAQ and 2.3% for the S&P 500. Some support has come in to help stabilize matters after US Q2 GDP (2.8% vs street 2.0% and previous 1.4%) grew more than expected, while the price component indicated easing inflation (2.3% vs street 2.6% and previous 3.1%). US durable goods orders plunged off a cliff, (-6.6%% vs street 0.3%), while US weekly initial jobless claims (235K vs street 238K) were a bit better than expected. US pending home sales are due at 10:00 am EDT.
The reaction to overnight earnings has been mixed. Ford Motor Company continued a trend of disappointing news out of the auto sector with a big miss on EPS and is down 13.0% premarket. Southwest Airlines beat the street on earnings but is down 4.6% premarket after the low cost airline announced a number of measures designed to boost revenues. The market reaction to earnings has not been all bad. IBM, for example is up 3.2% after beating expectations on earnings.