Software's Slide, Bitcoin's Blowup, Job Market's Meltdown
Could tech stocks be bottoming? Let's check (as we dust off from Applovin, AMD losses). Also, how low can Bitcoin go and time to buy Amazon, Alphabet?
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Stand up and give yourself a round of applause. The sound of just one. Clapping alone. Better than none, Tex. You ain't dead. You've been punched in the mouth. Spit out the broken teeth and get to work. I started talking about having to go full "battle rattle" back on Jan. 20 and stuck to that theme from Jan. 30 on. The S&P Technology SPDR exchange-traded fund made its recent high on Jan. 28 and has surrendered 14.3% since.
That's a lightning quick reduction in market cap for a heavily weighted part of the U.S. stock market. Over the past five trading sessions, that fund has given back 7.7% with the Dow Jones U.S. Software Index leading the losses at -11.5% over that same short period. For those wondering, the leading loser among the losers over those five days has been Unity Software (U) at -39.6%. Applovin (APP) has not been far behind at -34.1%.
The Dow Jones U.S. Semiconductor Index has given back 9.9% over five days as my beloved Advanced Micro Devices (AMD) has been roasted for a beating of 23.7%. Holy smokes, Sarge, you must have lost some dough this week. Yeah, no spit, Sparky. Guess what, Sport. This ain't my first rodeo, I'll live.
My bond account and my mixed asset accounts have had a much better week than my equities trading accounts. If you check, because I am going to bet that most of you don't manage your own debt securities trading accounts, that's a bit advanced, even for the sharpest tools in the shed, you will notice that your bonds have been bailing your stocks out through this period of volatility. You did see the yield paid by the U.S. Ten-Year Note drop to just 4.2% on Thursday, correct?
Now, over just a few days, we have been taught lessons covering self-enforced discipline at target prices on the way up (for longs) and panic points on the way down as well as covering diversity across asset classes. Remember, trading rule No. 1: Never accept a trading loss greater than 8%. That's a rule I only make exceptions for with the "Stocks Under $10" series for obvious reasons and if something unexpected happens during my daily period of sleep.
Living by your own code of discipline will relieve one of unnecessary stress during these kinds of periods. Will these hard-edged rules occasionally prevent one from maximizing profit? Yes. Will these rules also prevent catastrophe? Every time. You and I -- we have one thing in common. We find this exhilarating. We love the challenge. Are you coming for me, tough guy? Is this really all the guys you have? Rock & Roll.
Just a Heads Up
On Thursday, analysts at Goldman Sachs released a memo suggesting that this historic face-ripping of tech and specifically of software stocks could be bottoming or nearing its completion. The investment bank, which of course is not always right about everything, sees the sector mired in technically oversold territory calling these levels a "watershed moment" for entry.
Rude Awakening
Upon several occasions this week and coming into this week, I have mentioned the overall economic strength that I see across a number of data-points. I repeatedly made one exception. That was that this burst in economic activity did not include labor markets, which cannot be excluded for long as demand for labor ultimately supports consumption.
The advent of artificial demand has boosted and will continue to boost productivity as new tax laws support increased business to business spending. Gross Domestic Product has not missed beat and has in fact accelerated as 2025 dragged on into 2026. At what point does generative AI actually support demand for labor? Crickets. At what point does agentic AI actually support wage growth? Never.
There were some visible chinks in the armor that may have negatively impacted stocks on Thursday in addition to surprising guidance on capital spending announced by both Alphabet (GOOGL) and then later Amazon (AMZN) . Almost startling was the report by Challenger showing 108,435 layoffs in January, which was the largest one-month total since 2009. Yeah, that was a good year. Only if you were a Yankees fan.
After that, the weekly report on state-level initial jobless claims printed at 231,000 the highest total in eight weeks, while the Job Openings and Labor Turnover Survey for December hit its lowest total of job openings since the height of the pandemic and ex-Covid -- its lowest level since early 2018. By the way, I initiated a long position in Alphabet on weakness on Thursday and am considering an addition to my existing long position in Amazon at some point on Friday.
Presence
"Most humans are never fully present in the now because unconsciously they believe that the next moment must be more important than this one. But then you miss your whole life, which is never not now."
- Eckhart Tolle (German philosopher)
"Always Faithful, Always Forward"
- Your author, among the many, but really the few.
Marketplace
Was that it? Heck if I know, but it was not hard to see in "after hours" trading. As algorithms continued to pound tech stocks into submission, one could easily see the set-up for a Friday morning rally. U.S. equity index futures are hot as night oozes into morning. Can these gains hold into the weekend? It would be nice to see if professional managers were willing to take on risk going into Friday night or just merely covering profitable shorts.
"Ugly" would be an understatement for what happened on Thursday. The S&P 500 gave up 1.23% and lost contact with its 50-day simple moving average. The Nasdaq Composite surrendered 1.59% and lost contact with that line on Tuesday. The small caps? They suffered a moderately light 0.7% loss or were taken to the woodshed for a loss of 1.79% depending on whether one follows the S&P 600 or the Russell 2000.
Moving on to breadth, 10 of the 11 S&P sector SPDR ETFs closed out the session in the red, led lower for the day by materials (XLB) and discretionaries (XLY) , while the utilities (XLU) , as bond proxies were the only group not forced into the abyss. The staples finished just a pinch away from closing in green territory as traders did take on defensive postures. There was, indeed, at least a whiff of panic in the air that one could sense whether on Wall Street proper (where nobody works anymore) in New York or where Wall Street really is now (at least the decision makers), down here in Florida.
Losers beat winners by about two to one at the NYSE and by better than three to one at the Nasdaq. Advancing volume took a meager 27.9% share of composite NYSE-listed trade and an even more anemic 22.9% share of composite Nasdaq-listed activity. Was there good news? There's always good news, Cowboy. Aggregate trading volumes were lower on Thursday than they were on Wednesday. That was true across NYSE-listings, true across Nasdaq-listings. That was true across the membership of the S&P 500. This is how we knew that the professionals might try to pick off the little people last night.
Crypto-Mageddon
Bitcoin bottomed last night just above $60,000 per token, which was down 38.6% over a rough three-week period and down 33.6% just since Jan. 28. I see the world's best-known cryptocurrency trading with a $65,000 handle early this morning as Bitcoin continues to exist as the furthest thing from being a safe-haven type asset and behaves more and more like a high-beta risk asset all the time.
Readers need to be cognizant that Richard Farr, chief market strategist at Pivotis Partners has issued a $0 target price for Bitcoin. Farr posted to X (formerly Twitter) on Thursday, writing: “No serious central bank will ever own something where Michael Saylor controls the float.”
News
- On Thursday, the Trump administration announced the launch of TrumpRx, which will be a direct-to-consumer website that will be proposed to act as a hub pointing patients to providers that are offering discounts on certain prescription drugs.
- Intel (INTC) and Advanced Micro Devices have reportedly informed Chinese-based customers that supply shortages will impact the availability of processing units for PCs (CPUs). Intel is warning of delivery lead times of up to six months. Both stocks are participating in the zero dark-thirty market rebound.
Economics
(All Times Eastern)
10:00 - U of M Consumer Sentiment (Feb-adv): Expecting 55.6, Last 56.4.
10:00 - U of M One-Year Inflation Expectations (Feb-adv): Flashed 102.0.
10:00 - U of M Five-Year Inflation Expectations (Feb-adv): Flashed 102.0.
1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 546.
1:00 - Baker Hughes Oil Rig Count (Weekly): Last 411.
3:00 - Consumer Credit (Dec): Last $8.5B.
The Fed
(All Times Eastern)
Noon - Speaker: Federal Reserve Vice Chair Philip Jefferson.
Today's Earnings Highlights
(Consensus EPS Expectations)
Before the Open: (AN) (4.88), (BIIB) (1.63), (CNC) (-1.22), (UAA) (-.01)
At the time of publication, Guilfoyle was long UAA, AMD, GOOGL, AMZN, INTC equity.
