What's happening on Wall Street?
Yesterday,
Minutes after the open in the United States, the markets experienced a telenovela that would not shame a Turkish series.
Within less than 30 minutes of the open, the indices plunged.
The S&P 500 index lost a trillion dollars.
The Nasdaq plunged more than 3%.
Let's try to make sense of things and understand what's happening in the market now:
At 3:30 PM Israel time, inflation data was released in the United States.
And even though inflation stood at over 4%, the indices not only did not react with declines, but reacted with gains!
The reason?
It was priced in.
The inflation data was exactly as expected,
So what brought the markets down?
What shook the markets was actually news that came from elsewhere.
Apple updated that it is dramatically raising prices due to the rigid increases in memory prices.
Price increases will reach up to 25%.
You probably understand how something like this will affect inflation, right?
Apple's stock reacted with a sharp 6% drop, wiping out almost a quarter of a trillion dollars in market cap within minutes.
It's important to understand something here: on the premium channel, we talked about this quite a bit this week, that market mechanics are working against us at these levels.
We explained and warned that any market decline could cause immense volatility and forced sales by algos and leveraged positions.
We saw the result of this today, as Apple's decline led to a chain reaction and brought down the indices.
In fact, not only Apple is raising prices due to the rise in memory prices,
Other companies also updated on dramatic price increases due to memory prices, including Microsoft, which updated on raising its Xbox prices by tens of percent.
GoPro informed the regulator that if a buyer is not found for the company, it may go bankrupt because it can no longer withstand competition and absorb the rise in memory prices.
The general situation says one thing:
AI inflation is passing to the consumer, and from there it will go directly into inflation data, increasing the chances of an interest rate hike.
And that is not good for the market.
Meanwhile, the market recovered, the Nasdaq returned to gains, but a look at the heat map shows a very clear division within the indices.
All the giants are in the red: Nvidia, Google, Meta, Apple, Amazon, Tesla, Broadcom, Walmart, all weighing on the market, while the chip sector continues to support gains.
The gains are still very concentrated, and volatility is here to stay.