Stock Market After Close: Today's Pain Could Set Up Later Gains
The latest stock market updates after the closing bell — breadth, winners, losers, the S&P 500, Dow, Nasdaq and more.
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A late bounce helped to limit the damage on Wednesday, but there was quite a bit of ugliness under the surface. The biggest problem was that the stocks with the biggest recent gains were hit hard. Many of these stocks have questionable fundamentals and valuation, but they have been riding a wave of momentum that went too far too fast.
One of the easiest ways to see what is happening is to look at the IBD50 (FFTY) . This list is primarily growth stocks that have both strong growth and relative strength. The group was down about 3% on Wednesday and down close to 10% since the open on October 16.
The number one stock in the IBD50 a week or so ago was data center name IREN, Ltd (IREN) . IREN hit $74 six trading sessions ago and closed on Wednesday at $51.87. It is a good illustration of how stocks that go up on strong momentum tend to go down on strong momentum.
While there is quite a bit of carnage in many of the more speculative stocks, the indices are still holding up fairly well. The S&P 500 is less than 4% from its all-time highs, and the Magnificent Seven is still within spitting distance of its highs.
Small caps are lagging and were down 1.4% on Wednesday, which is reflected in breadth, which shows 62% of stocks declining and more new 12-month lows than highs.
The question now is whether the third-quarter earnings season will help to put things back on track. The Netflix (NFLX) report on Tuesday night was a disappointment. Tesla (TSLA) is reporting an EPS miss after the close and is trading down 2% but the conference call will be more important than EPS. IBM (IBM) is also lower despite beating on the top and bottom lines.
The market has needed a shakeup for a while, and while this is painful, it will help to create better conditions for upside as we move into the period with the best seasonality. A little pain now will set the stage for gain later.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
