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Bull Case Cracks...


13.Nov.2018

US stocks (sector performance) fell sharply with the S&P500 and Small caps dropping -2% and the Nasdaq shedding -3%. Tech was the main culprit for yesterday’s decline, spurred by APPL shedding -5% after Lumentum (the laser provider of the latest Iphone X line), cut its Q2 outlook, citing “one of its largest customers” asking to “meaningfully reduce shipments” for previously placed orders. Apple had also recently told Foxconn and Pegatron to halt plans for additional production lines dedicated to its lower-priced iPhone XR line. As a result, the Semiconductor Index ended the day as the hardest hit sector dropping 4.4%, followed by the always high beta sector of Biotech which dropped 3-4%. GE was the second worry of the day after its share price sank 10%, following CEO Larry Culp’s interview with CNBC, and after a near 6% decline on Friday which was traced to a JPMorgan analyst downgrading the stock as the company found itself hard pressed to answer questions regarding the credibility of its numbers, the importance of too large liabilities and a timeline for the recovery of its energy business. The third worry came from a failure of oil prices to stabilize. HY credit took a hit on mounting risk aversion (lower equity prices) and lower oil prices yesterday. A latest BoA survey had earlier showed credit investors turning notably more bearish on fundamentals in particular those among HY investors due to lower equity and oil prices. 

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