by Wolf Richter, Wolf Street:
But the market is due for a bounce, according to the WOLF STREET dictum that “Nothing Goes to Heck in a Straight Line.”
Monday would be a good start for a bounce. It could also start on Tuesday or in November or whenever. And maybe not much of a bounce. But the market is due for a bounce after what it has been through in September, or actually since August 16, which was the end of the bear-market rally.
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The unsightly demise of this bear-market rally is adding to the spooky parallels to the dotcom bust, which was also interrupted by a rally in the summer of 2000, when the Nasdaq Composite rallied 33% without getting back to its previous high, and then ultimately collapsed by 78%, from which it wouldn’t fully recover until 15 years later, in July 2015, after the Fed had thrown trillions of dollars at the market with QE. But back then, inflation was well below the Fed’s target. Now inflation is raging well above the Fed’s target.
So since the end of this summer’s bear-market rally on August 16, the S&P 500 Index has dropped 16.7% and the Nasdaq has dropped 19.5%, both of them just barely above the February 2020 levels.
Many of the stocks on my list of Imploded Stocks have plunged by 50% or more over the same period, to carve out new lows after having shot up by 100% over the prior weeks – such as Carvana [CVNA] which roundtripped from $20 on July 14, to $54.59 on August 16, and back to $20.30 on Friday, September 30. Up 170% in five weeks, and giving up all of it over the subsequent six weeks. Carvana is down 95% from its intraday high on August 10, 2021.
That’s how crazy this market still is, and that’s why the bottom is not anywhere in sight, and there is absolutely no capitulation, but stocks are due for a bounce.
In September, the S&P 500 Index dropped 9.3%, the worst monthly drop since March 2020, and the worst September since the dotcom bust.
Every sector got whacked in September, even energy. Healthcare got hit the least (-2.6%). The sectors that got whacked the most in September were: Information technology (-12.0%), Communication Services (-12.1%), and Real Estate (-13.1%).
Year-to-date, Energy was the only sector that was up (+34.9%), though the sector dropped 9.3% in September, according to S&P Dow Jones Indices.
In further spooky parallels to the dotcom bust, year-to-date: The two tech-related sectors – Communication Services and Information Technology – have plunged 31% and 39%. And several of the Big Tech stocks have plunged far more than that from their respective highs; more in a moment.
| S&P 500 Index Sectors | September | YTD |
| Energy | -9.3% | 34.9% |
| Utilities | -11.3% | -6.5% |
| Consumer Staples | -8.0% | -11.8% |
| Health Care | -2.6% | -13.1% |
| Industrials | -10.5% | -20.7% |
| Financials | -7.8% | -21.3% |
| Materials | -9.4% | -23.7% |
| Real Estate | -13.2% | -28.9% |
| Consumer Discretionary | -8.1% | -29.9% |
| Information Technology | -12.0% | -31.4% |
| Communication Services | -12.2% | -39.0% |
But it’s worse when compared to their respective highs:
The S&P 500 Index closed on Friday at 3,586, down 25.6% from its intraday high on January 3, and where it had first been in November 2020.
The Russell 2000, which tracks small-cap stocks, is down 31.8% from its high on November 5, having thereby maintained its function as early warning signal.
The Nasdaq closed at 10,576, down 34.8% from its intraday high on November 22, the very day Microsoft CEO Satya Nadella dumped 50.2% of his Microsoft stock in a bunch of frenzied trades, totaling $285 million. On the list of best-timed insider trades ever, he must be at the very top. Since then, Microsoft shares have plunged 33.4%, to $232.90, the lowest closing price since March 2021.
The Big “Tech” plunge from recent highs.
But Microsoft is the second-best-performing stock of the cadre of Big Tech stocks. Apple is the best-performing, down “only” 24.5% from its high at the beginning of January 2022.
The worst-performing Big Tech stocks are Meta, Netflix, and Nvidia, all of them down about 65% from their respective highs. These are massive sell-offs for big companies.
Two of those companies — Cisco and Intel — had peaked 22 years ago; Cisco is down 51% and Intel 65% from that peak 22 years ago.
