What was most notable about the action was that breadth was almost exactly even, but there was a huge disparity in performance between the DJIA and the Nasdaq 100 (QQQ) . While technology stocks were hit extremely hard, industrials such as Caterpillar (CAT) and Honeywell (HON) were flying higher.
It is very intense rotational action, although in view of how elevated the technology stocks were for so long, it was almost inevitable. Many of the tech names are still quite expense versus their industrial peers, but the gap is closing quickly.
After the close, Amazon shocked the market with very poor sales guidance for the fourth quarter of $140 billion to $148 billion versus expectations of $155.5 billion. Amazon is dealing with inflationary pressures as well as increased competition from other retailers like Walmart (WMT) . One of the most surprising metrics in the Amazon report is that it had a negative profit margin on $105 billion in retail sales. That was offset to some extent by the Amazon Web Services business.
Amazon is trading down around 17% after hours on the news, as I write this. Like Meta, market players did not see this coming, and they are running for the sidelines.
Meanwhile, Apple has posted small beats on the top and bottom lines, but it doesn't seem enough to please this market. The stock is trading down a bit so far in after-hours trading.
The big question now is whether these big-cap earnings reports are a sign of things to come for the broader market or are they just finally catching up to the downside after being overpriced for so long.
The problem of this disparity between technology and everything else becomes even more complex as we deal with sustained levels of inflation and slowing economic growth. Technology names tend to be leaders, but they are 0 for 4 this quarter. Are they leaders to the downside as well?