Markets tanked on Thursday, especially among the most growth and technology focused areas.

Below are highlights from the NDW Morning Update Video for the morning of 10/23. Access the video on the NDW Morning Update Video page. 

• Markets tanked on Thursday, especially among the most growth and technology focused areas. The S&P 500 dropped 1.21%, while the Technology Select Sector SPDR Fund XLK dropped more than 3%. Downside was led most prominently by semiconductors as AI names took a hit, with the Invesco Semiconductors ETF (PSI) plummeting 9%.
• The selloff was partially due to quarterly announcements from Meta Platforms (META), which declined 7% on the day after releasing higher guidance on its capital expenditures for the year, as well as higher than anticipated AI-related spending commitments. With today’s action, the Mag 7 stock is an unacceptable 2 for 5’er after losing near-term market relative strength.
• Not every area of the market was negative, though, with the S&P 500 Equal Weight moving 0.7% higher. Defensive areas performed even better, with flight to safety from investors causing the Consumer Staples Select Sector SDPR to rise 3.3%. The Staples fund is now up 11.7% in October, which puts the sector fund on track for its highest calendar month return on record (dating back to 1998).
• Panic from investors also served as a tailwind for high quality fixed income, as the iShares Barclays 20+ Year Treasury Bond ETF (TLT) rose 1.87%. Meanwhile, the ten-year treasury rate declined almost 20 bps. Bonds have rebounded from heavily oversold territory over the last couple weeks, but fixed income continues to lack long-term strength given its consistent decline prior to that.
• Woes over AI capital expenditure have bled into the credit market, as highlighted in our most recent featured article. The corporate high yield 10Y spread (CBUS10YRSPREAD) has risen 80 bps from its lows this year, signaling decreased confidence in the economy, and by extension, bond and equity markets.