1. Panic selling kicks off the week
The stock market experienced one of its most turbulent weeks since the pandemic after a sudden shift in Japan’s monetary policy triggered an unwinding of yen carry trades on Monday (August 5). That set off a chain reaction that led to a selloff in Asian stock markets as investors tried to reduce their risk exposure.
In the US, investors were already on edge following troubling economic data from the previous week. The poor performance of Asian indexes stoked fears of a looming recession and sparked a massive selloff of high-risk assets, including inflated tech stocks. The S&P 500 (INDEXSP:.INX) opened at 5,151 on Monday, 0.67 percent below Friday’s close, and lost another 0.62 percent during early trading, bottoming out at 5,119.
Meanwhile, the Nasdaq-100 (INDEXNASDAQ:NDX) was down 2.52 percent from Friday at the opening bell on Monday, and shed another 0.05 percent early on, dropping to a low of 17,435.
The Volatility Index (INDEXCBOE:VIX), which is better known as the VIX and is considered Wall Street’s “fear gauge,” opened Monday at 65.73, jumping 42 points above its close on Friday, its largest-ever intraday jump.
By the end of the day, market sentiment had improved. The S&P 500 and Nasdaq-100 both saw rebounds, closing 2.36 and 3.68 percent higher, respectively, from their lowest points on Monday.
S&P 500's performance, week of August 5, 2024.
Chart via Google Finance.
However, volatility plagued the market leading up to Thursday’s (August 8) weekly US jobs report.
The report shows initial jobless claims of 233,000, fewer than the 240,000 estimate, suggesting elevated data from last week may have been disproportionately influenced by disruptions caused by Hurricane Debby.
Indexes gained some ground as investors trickled back into tech stocks. The S&P 500 recovered more than 4 percent and the Nasdaq-100 gained over 5 percent on Thursday, as compared to their lowest points on Monday, indicating a substantial rebound from the previous week's losses.
As for individual stocks, Intel (NASDAQ:INTC) took the lead, regaining nearly 8 percent by the time trading closed on Thursday, with artificial intelligence darling NVIDIA (NASDAQ:NVDA) in a close second with over 6 percent.
For the week, the S&P 500 was down 0.05 percent, the Dow Jones Industrial Average (INDEXDJX:.DJI) was down 0.6 percent and the Nasdaq was down 0.2 percent.
2. Solana breaks out as crypto sector recovers
Panic selling also added to uncertainty in cryptocurrency markets this week.
According to the Block’s crypto price page, the entire industry sank 18.2 percent in 24 hours as of Monday.
Bitcoin suffered the most significant losses heading into the week, eventually shedding 16 percent to fall below US$50,000 for the first time since February at Monday’s market open. Ethereum also experienced major price movements, dropping to a low of US$2,197 on Monday morning. The Bitcoin Volmex Implied Volatility Index reached its highest level in 20 months.
Along with macroeconomic events, Jump Crypto’s asset movements and the increasing odds of Kamala Harris winning the upcoming presidential election against pro-crypto Donald Trump were also cited as factors for the price drop.
Institutional investors buying digital assets at low rates drove a recovery on Tuesday (August 6) and Wednesday (August 7). Solana also saw major gains, hitting an all-time high against Ether. Wednesday also marked the conclusion of Ripple’s long legal battle with the SEC, with Judge Analisa Torres ruling sales of Ripple’s XRP token violated securities law and ordering the company to pay a US$125 million fine, sparking a 20 percent rally and a surge in trading volume.
On Thursday the rally continued, with Bitcoin crossing into US$60,000 territory for the first time this week and Ethereum breaking past US$2,600.
While prices have somewhat rebounded alongside stock markets, the recovery has been uneven. As of Friday (August 9)afternoon, Bitcoin is selling for 2.2 percent less than last week and down 1.7 percent in 24 hours, but up 5.5 percent over 30 days. Conversely, Ethereum has struggled to regain lost ground, currently down 2.8 percent in 24 hours, and still down 13.6 percent and 16.2 percent over seven and 30 days, respectively.
3. Berkshire Hathaway halves Apple holdings
Berkshire Hathaway’s (NYSE:BRK.A,NYSE:BRK.B) decision to sell nearly half of its Apple (NASDAQ:AAPL) stock may have acted as a catalyst to the recent tech selloff that pummeled the major indexes on Monday.
Berkshire Hathaway’s Q2 2024 report was released on Saturday (August 3), showing the firm had cut its stake in Apple by 49 percent, leaving it with a position worth US$84.2 billion in Q2 compared to US$174.3 billion in Q1.
The sale contributed to Berkshire’s cash pile reaching US$276.9 billion.
Although Buffet previously stated that Berkshire would likely maintain its holdings in companies like Apple, American Express (NYSE:AXP) and Coca-Cola (NYSE:KO) — “unless something really extraordinary happens” — analysts watching Buffet’s moves have noticed that he’s been quietly unloading stock.
Gary Mishuris, managing partner and chief investment officer of Silver Ring Value Partners hinted at a potential change in Berkshire’s approach back in May after the company’s annual meeting.
Days before the release of the report, on August 1, Edward Jones upgraded Berkshire Hathaway’s status to “hold.” “Buffett doesn't seem to think there are attractive opportunities in publicly traded stocks, including his own. It makes me worry what he thinks about markets and the economy,” Edward Jones analyst Jim Shanahan told Reuters.
Investors spooked that those worries may have come to fruition engaged in a massive stock selloff during after-hours trading, with major tech stocks like Apple, NVIDIA and Alphabet (NASDAQ:GOOG) dropping 9.45, 14.18 and 6.69 percent over the weekend by Monday’s opening bell. For months, concerns about overvaluation and over-concentration in tech stocks have been simmering in the background, with some asserting that this correction was due.
While the sector and broader stock market have shown signs of recovery since Monday’s selloff, former US Federal Reserve economist Claudia Sahm, while speaking on Bloomberg’s Surveillance program on Monday, cautioned that we might not be out of the woods yet.
4. Long-awaited Google antitrust ruling issued
A landmark decision with far-reaching implications for the tech industry was reached on Monday.
In the US vs. Google antitrust case, which has been closely watched since the US Department of Justice sued the company for monopolizing the digital advertising space in January 2023, Judge Amit Mehta ruled that Google had in fact acted illegally to maintain its dominant position over online search advertising.
“Google’s distribution agreements foreclose a substantial portion of the general search services market and impair rivals’ opportunities to compete,” the ruling reads, referring to the US$26 billion Google paid to Apple, Samsung (KRX:005930) and Mozilla to be the default search engine on web browsers and mobile devices.
Mehta continued, “The trial evidence firmly established that Google’s monopoly power, maintained by the exclusive distribution agreements, has enabled Google to increase text ads prices without any meaningful competitive constraint.”
Alphabet’s Q2 results, which were released on July 23, show that advertising revenues from Google Search, as well as other sources, totaled US$48.5 billion during the period.
On the ruling, Kent Walker, Google’s president of global affairs, had this to say:
“We appreciate the Court’s finding that Google is ‘the industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users,’ that Google ‘has long been the best search engine, particularly on mobile devices,’ ‘has continued to innovate in search’ and that ‘Apple and Mozilla occasionally assess Google’s search quality relative to its rivals and find Google’s to be superior.’ Given this, and that people are increasingly looking for information in more and more ways, we plan to appeal.”
5. Super Micro Computer earnings fall short
Super Micro Computer (NASDAQ:SMCI) had one of its worst trading days in six months on Wednesday after its Q4 and fiscal year 2024 results showed a rapid decline in the company’s gross margin.
The company reported a gross margin of 11.2 percent for Q4 after Tuesday’s bell, below analyst estimates of 14.1 and far below 17 percent from its fiscal Q4 2023.
Despite a promising sales forecast between US$6 billion and US$7 billion – above analysts’ forecasted US$5.46 billion – its stock price plummeted 13.79 percent to open at US$531.88 on Wednesday and continued falling throughout the day.
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Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
