Last night we saw the resumption of Monday and Tuesday’s widespread declines. Momentum names led the fallers, as tech and biotech lost favour once again. The S&P 500 moved down to levels not seen since the start of March, and the NASDAQ had its worse day since 2011 moving 3% lower. Given that today gives us the first real meat of earnings season (JP Morgan and Wells Fargo announce before the bell today) you would be forgiven for packing your bags and taking the weekend to digest the week’s volatility.
US markets highlighted the downside protection that investors are taking out as the VIX jumped 19%. However, bulls will take comfort in the VIX 'only' being at 16, so it still has some way to go to reach the levels we saw early in the year as the market wobbled on emerging market fears.
The Federal Reserve confirmed its dovish views, yet overall the market has been shaky with periods of high volume, with a slight feeling that neither side is pushing enough flow into the markets to make a longer-term push either way. Regardless of this, US earnings need to match up with expectations over the next few weeks or that sell button will get easier to push.
Closer to home, a FTSE led by Morrisons (+1.5%) shows just how weak the market is this morning. Joined by only a handful of blue-chip peers, it is the same sectors we saw taking a dive earlier in the week, like housebuilders and airlines, with ARM Holdings again catching the cold of America sneezing and joining in, down 3.5%. Hargreaves Lansdown (-4%) sits bottom, thanks to a price target cut from Morgan Stanley.
Europe’s selloff has playing catch up to events in the US, but so far in today’s trade US futures have held firm, and we note some weakness creeping in as the morning has gone on. Currently we have flat opening calls; 16185, 1833.5 and 3486 for the Dow Jones, S&P and NASDAQ respectively, with the latter being just the wrong side of the flatline.