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The Market Sum | INVESTOPEDIA

Insight after the bell

By Caleb Silver, Editor in Chief

Monday's headlines

1. Stocks trounced in tech-led sell off

2. Chart of the day- New lows for key S&P 500 stocks amid market turmoil

Markets Close

Dow
25,387.18 -2.32%

S&P
2,726.22 -1.97%

Nasdaq
7,200.87 -2.78%

VIX
20.28 +17.4%

Bitcoin*
6,382.42 -0.40%

EUR/USD*
1.1233 -0.34%

*Currency markets and Bitcoin trade 24 hours, the figures here indicate movements between 9am and 4pm ET

#1 Stocks trounced in tech-led sell off

Editor's Note: Before we dive into today's sell-off, a quick note on perspective:

Happy Veterans Day to all the veterans and their families. No one but you knows the extent of the sacrifices you have made and continue to make on our behalf, but we can all be grateful. Thank You!

California is burning and it's bad. The wildfires consuming central and southern California are very deadly, dangerous and out of control. Dozens of people have lost their lives and many more are still in harm's way. There are some very brave people out there trying to fight these devastating fires and they also deserve our gratitude. Be safe.

#Perspective

There was nowhere to hide today as sellers were firmly in control and had only one color in mind. All major U.S. markets closed sharply lower with the Nasdaq leading the parade of losses as tech stocks fell, and fell hard.

Highlights from the House of Pain:

Shares of Apple fell more than 5 percent as Lumentum, which makes facial recognition technology for the new iPhones, cut its outlook due to significantly lower orders from 'a major customer'. Lumentum makes 30 percent of its sales from Apple. Apple told us a couple weeks ago that it will stop reporting unit sales of iPhones. Read between the lines.
Shares of Goldman Sachs fell more than 7 percent, their biggest drop in 7 years, as Malaysia is suing the bank to recoup the fees it was charged for a failed investment deal. CNBC has the details.
Facebook shares fell 2 percent, but the social network had bigger problems as the entire platform suffered an outage that lasted several hours.
Shares of GE fell below $8 per share as the company faces more analyst downgrades and the pressure to pay down debt.
We are facing another government shutdown on December 8th unless major compromises are made over immigration policy, the Mueller investigation and a host of other issues. Here's what you need to know.
Shares of Amazon fell into bear market territory today - down 20 percent from their highs. Remarkable how recently we were celebrating its crowning as the second $1 trillion company.
Even Aurora Cannabis, which reported a huge jump in revenue growth for the last quarter (for a cannabis company, that is…) got torched to the tune of 4 percent. Investors couldn't even hide in the cannabis patch today.

Major markets are still higher for the year… barely. The President, who likes to take credit when the markets rise, is officially blaming the recent selloffs on the investigations surrounding him.

Why it Matters: It matters that the President wants us to believe that the Mueller investigation is the source of this sour investor sentiment. Not even a month ago, the President blamed the Fed Chair, Jerome Powell for the selloff for doing his job of steering monetary policy. We know that you know better, but the power of narratives can be destructive if they are not viewed with great skepticism.

The reality is that the markets have been on shaky ground since August. There was volatility in January and February, and even a correction during that spell. But August brought a whole new wave of anxiety into the mix based on at least these factors:

Interest rates were rising which made for higher bond yields
The Fed had gone from being a buyer of treasuries to a net seller
Home prices started falling and home building started slowing
The impact of tax cuts had already been priced in to stocks
The Dollar was strengthening. It still is.
Global growth started slowing (We are in a global market, folks… deal with it)
The rhetoric around a trade war with China intensified

The President can absolutely take credit for the last point. Trade wars are rarely good for any economy, but when the two biggest economies in the known galaxy square off, no one wins. That said, only 9 percent of the companies in the S&P 500 that reported earnings during the past month mentioned Trade and Tariffs as negative impacts to their businesses. Don't be fooled.

What's Next: Tuesday!!?? It's hard to believe we are only one day into the week and already down 2 percent, but welcome to the new normal. There are a few more major earnings announcements this week, including Walmart, but it's pretty clear that investors are over earnings, in general. Companies have been reporting solid earnings and sales growth for the past month, but negative sentiment has swatted that good news away like fruit flies in the summer.

With about six weeks to go in 2018, expect more selling as investors take some tax losses and rebalance their portfolios for the new year. You should be considering both, depending on where you are in your life and your investment horizon.

If you need some guidance on those topics, we are here for you:

Our Annual Financial Planning Guide

Rebalancing Your Portfolio to Stay on Track

Tax Loss Harvesting Tips

International headlines:

Tech, tobacco push European stocks into red, ending fragile rebound

U.S. not concerned by Europe's idea for Iran trade as companies moving out

Chart of the Day: New lows for key S&P 500 stocks amid market turmoil

While last week held some promise that a market rebound may have been underway, Monday's continued slide from Friday has quickly begun to dispel those hopes.

What may be even more worrying than just another sharp market drop, though, is the quantity and breadth of major S&P 500 stocks hitting new 52-week lows. There's nothing really special about 52 weeks – other than that it adds up to a year – but it's long been used as a way to benchmark longer-term stock performance. Most investors like to hear about 52-week highs, but those have been relatively few and far between in recent weeks. As of Monday afternoon, we're seeing the number of new 52-week lows dwarf the number of new highs today – by a factor of more than 10-to-1 on the Nasdaq exchange alone.

The chart below illustrates just how bad it may have become. The five S&P 500 component companies highlighted – General Electric, Goldman Sachs, Electronic Arts, Schlumberger, and Pacific Gas & Electric – are all in widely-diverging sectors and industries, and yet, have all hit new 52-week lows on Monday. Their six-month performance figures labeled on the right axis show just how poorly these stocks have done since May.

The worst of them, of course, is debt-ridden GE, which has been having well-publicized financial troubles and has slashed its once-prized dividend payout to almost nothing. Its 6-month loss of value has been around a whopping -45%. And although Goldman Sachs may be the least weighed-down of the group thus far, a recent fraud scandal has threatened to hit the stock with significantly further losses. Whatever the reasons may be for these stocks hitting new 52-week lows, the most concerning thing about what it is possibly saying is that the market's structure may be getting even weaker and could be pointing to more potential weakness on the horizon.