After hitting new all-time highs on Monday, stocks reversed lower, but a late bounce helped to cut some of the losses. Small caps and growth stocks continued their descent, but big caps suffered from a big selloff in technology stocks in China and nervousness about the earnings reports due Tuesday night.
The FATMAAN names have been running strong, and expectations are high, which raised the danger of a "sell the news" reaction. Both Microsoft (MSFT) and Starbucks (SBUX) posted strong reports, but are selling off. Alphabet (GOOGL) had monster earnings per share and blew out estimates, and is trading higher. Apple (AAPL) is due at 4:45 p.m. ET and will decide how aggressive the sell the news inclination is right now.
It was a rough day for the market, with breadth running 2,300 gainers to 5,600 decliners and new 12-month lows expanded to 290. Small caps saw no rotational benefit from the sell-off in big caps, but these earnings reports are going to shake things up Wednesday, and that is what we need to get some of the hardest-hit stocks to some good support.
I probably shouldn't use the phrase "washed out," but there sure are a lot of stocks that are looking like the pace of selling is slowing down. If the entire market was acting like some of these small caps, I'd be looking for a very energetic snap-back, but the disparity between the indexes and the great bulk of stocks has created a confusing mess. A sell the news reaction in the big-cap names that are reporting tonight may be the best thing that can happen to produce a better market environment.
Have a good evening. I'll see you tomorrow.