Wolf Richter wolfstreet.com, www.amazon.com/author/wolfrichter
Wow, did you see that? That was quick.
Friday morning between 10:15 AM and 11:15 AM, the Nasdaq gallivanted around blissfully for an entire hour in record territory of around 6,340 with not a worry in sight, and then someone must have looked at the valuations or something, and it became infectious, and the sell-orders started pouring out, and by 2:48 PM, the Nasdaq hit a low for the day of 6,160, down 3.1% from peak to trough.
It closed at 6,208, down 114 points, or 1.8%, its biggest daily decline so far this year.
Meanwhile, the Dow rose nearly 90 points or 0.4% to 21,272. And the S&P 500 ended down a minuscule 2 points.
The market is so dependent on the infamous FAANG stocks: Facebook, Apple, Amazon, Netflix, and Alphabet (the Google in the acronym). And here’s how they did:
Facebook fell $5.11, or 3.3%, to $149.60.
Apple fell $6.01, or 3.9%, to $148.90.
Amazon fell $31.96, or 3.2%, to $978.31 now demoted from the elect group for 4-digit stocks back to the large group of 3-digit stocks.
Netflix plunged $7.85, or 4.7%, to $158.20.
Alphabet – the G in FAANG – fell $33.58, or 3.4%, to $952.23, moving further away from everyone’s dream of closing at $1,000.
The five FAANG stocks combined had a market capitalization of nearly $2.5 trillion this morning when the market opened. That’s larger than France’s economy when converted to US dollars, with a GDP of $2.4 trillion. By the time the trading was over, the FAANG stocks had dropped within a hair of France’s GDP, having lost $88 billion less than five hours.
In other news…
NVIDIA which had soared along an exponential curve over the past two years, dropped $10.34, or 6.5%, to $149.60. But the drama was intraday. By 2:50 PM it had plunged a dizzying 15% in three hours from its high in the morning. Whatever that means, it’s not good.
Micron fell $1.85, or 5.7%, to $30.60
Intel was down $0.77, or a more leisurely 2.1%, to $35.71
Applied Materials dropped $2.69, of 5.7%, to 44.74
Tesla dropped $12.68 or 3.4% to $357.32
Snap, parent of Snapchat, a startup with toxic operational fundamentals and an even more toxic approach to shareholder rights, dropped $0.77 or 4.1% to $18.08, its second lowest close since its IPO.
What to make of it? This move shows just how nervous the market has gotten at these nosebleed valuations.
This morning, perennially money-losing and cash-bleeding Tesla had a valuation of $60 billion, a company that sells so few cars that it disappears as a rounding error in the 1.52 million new vehicles sold in the US in May. It’s not even on the scale. Yet folks, now waffling about solar panels too and still waiting for the miracle that has been promised for a decade, think it’s worth nearly $60 billion? The market is currently full of these kinds of crazy valuations. And everyone wants to pick up the last nickel in front of that steamroller they already see coming. So their hands get a little twitchy.