JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- VanEck ETF reflects market activity
- Netflix and SpaceX earnings out tomorrow after the bell
- Black Monday 39 years ago made stock market history
We’ve seen this story before: The markets collapse and investors jump in afterward to buy on the dip. That’s what appeared to be in play today after a rough period last week for technology and artificial intelligence (AI) stocks.
The VanEck Semiconductor exchange traded fund (ETF), which tracks the movements of the 26 largest semiconductor companies, reflects the movement. After losing some 10% overall last week, the ETF moved 1.6% higher today on the back of chip makers gains including Nvidia,
Taiwan Semiconductor Manufacturing Co. (TSMC), Advanced Micro Devices, Broadcom, Intel and Micron, among others.
That doesn’t mean that investors suddenly changed their minds about the AI risk/reward equation with such heavy investments and no real return to show for them yet. Nor did any of the other macroeconomic factors that fueled the market drop change: tech stocks are still pricey, the inflation issue hasn’t improved and WTI oil prices continue to climb. But as what often happens with such big declines, investors were probably thinking today that last week’s selloff might have been too much too fast.
The tech-heavy Nasdaq led the markets higher, finishing up better than 1%, while the S&P 500 Index gained 0.41%. Meanwhile, the Dow Jones Industrial Average, which didn’t move much last week was flat again today. CoreWeave, the neocloud company that was called the “poster child” of last week’s AI-related debt concerns, managed to climb upward in early trading, but couldn’t hold on to the momentum, subtracting 0.44% at the close. CoreWeave shares have lost 23% since the start of the year.
This is also a heavy earnings week and some investors might be trying to get ahead of the results. Before the bell tomorrow, General Motors, 3M and GE Aerospace will open their third-quarter books, and after the bell, we’ll be looking for results from Netflix and SpaceX.
Netflix shares have been under pressure this year, losing 23% year-to-date after the streaming video giant acknowledged growth has slowed. The company has laid off 6% of its workforce and has replaced a handful of top executives while others have left. Wall Street expects revenues to grow by 12% on a year-over-year basis, which is softer than past quarters. There’s an 8.5% implied volatility move in either direction with heavy activity in the 73 calls and two times normal activity in the 65 puts.
SpaceX’s implied movement sits at 6.3%, with 155 calls as the most popular as are the 140 puts. As we’ve noted before, some investors are waiting to hear if SpaceX and Tesla, both Elon Musk-led companies, might merge.
On a side note, Black Monday was 39 years ago today, the stock market’s worst single-day percentage drop in history, erasing 22.5% of value. That doesn’t make it the severest stock market crash – the Great Depression still holds that record over two days – but it reminds us that bull markets and bear markets never move in straight lines and investors should be mindful that volatility can strike at any time. And, as the Federal Reserve points out, “even during an economic expansion.”
Happy Trading!
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