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Monday, March 4, 2024

Mega Caps Prove Less Than Magnificent for the Market

Mega Caps Prove Less Than Magnificent for the Market

Many investors were hopeful that good earnings reports from some major technology stocks would help to start much-anticipated positive seasonality. Microsoft (MSFT) delivered a solid report and held onto about a 3% gain on Wednesday, but it did nothing to help support the broad market.

Alphabet (GOOGL) was disappointing, although it beat on both the top- and bottom- lines. Its cloud business lagged, and that was all that the market cared about. It wasn’t that bad of a report, but the entire market crumbled when the Magnificent Seven mega-cap tech stocks did not turn out to be that magnificent.

The action on Wednesday was some of the worst we have seen in this down cycle. It wasn’t just the three-to-one negative breadth or the 1,200 stocks hitting new 12-month lows. It was the very gloomy mood and the inability to produce any sort of bounce action. Dip buyers didn’t even make minor buys, and good earnings really didn’t matter.

The good news is that we are now getting some very extreme negativity. That doesn’t mean the selling is over, but another push or two lower will create the sort of washout that can produce capitulation. It is very hard to predict lows of this type, but as I have often written, bad markets don’t scare you out; they wear you out. This one is really worn out many people.

We have earnings tonight from Meta (META) and IBM (IBM) , and it will be interesting to see what it will take to produce a positive reaction. After today, investors are likely more inclined to sell into strength rather than chase it, so it is going to take some very good numbers to produce sustained strength.

Meta earnings appear to be delayed, but they just hit and appear to be nicely ahead, especially on the revenue side. The stock is trading up around 4.5% and has recovered the day’s losses, but can it lift the broad market?

Have a good evening. I’ll see you tomorrow.

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