Overnight Headlines

*Global bond slump reverses amid tech selloff and Russia tensions

*Japan’s inflation hovers around 2-year high, BoJ flags price pressures

*Oil falls as inventory build prompts profit-taking, gold edges higher

*Nasdaq futures extend loss on rate concerns, Asian markets tumble

US equities reversed losses into the last hour of trade as the Vix climbed above 25 hitting highs last seen before Christmas. The Dow closed lower 0.9%, S&P500 -1.1% and the Nasdaq -1.3%. Netflix warning on subscriber growth after the market close saw the stock fall by nearly 20%, adding to the gloom. Asian markets are all lower today, so too European and US futures, led by the tech selloff.

USD was generally soft though it came off the lows to close marginally higher.  DXY held above support at 95.51 and traded in a narrow range. EUR extended its losses near to 1.13 as the ECB minutes showed an ongoing dovish stance. A bounce in GBP was reversed and cable now trades on long-term trendline support. Safe haven JPY and CHF are both bid today as Russia/Ukraine tension mount. AUD and NZD are suffering, with the kiwi nearing strong support around 0.67.

Market Thoughts – Correction mode in tech, amid Netflix drama

US stock markets are looking grim with a notable sharp reversal in the last hour and the close on their lows. The Nasdaq has now fallen 12.7% from the record hit in November so is officially in “correction” territory.

Since hitting the bottom in March 2009 amid the GFC, the bull run has been interrupted by 12 major selloffs – 10 by “corrections” of up to 10% and two bear markets with declines of more than 20%. The selloff in “stay-at-home” stocks is also grabbing the headlines with Peleton plunging 24% and Netflix sliding after hours.

Sentiment appears to be shifting, though the Netflix warning is not necessarily a story for the rest of the big FANG stocks as it lacks what Warren Buffett would call “a wide economic moat”. Competition has intensified as the pandemic continued, even after Netflix’s great start in the streaming battle.

The Fed meeting, with an announcement on further tapering expected, and more megacap tech earnings releases next week loom large. Before that, we have the make-or-break meeting between Blinken and Labrov today to try to avoid a Russian incursion into Ukraine.

Chart of the Day – Nasdaq closes below 200-day SMA  

After finding support above 15,508 last week, the Nasdaq 100 briefly traded back above the 100-day SMA around 15,700. But this support was lost, and we’ve had three straight days of losses taking us through Fib levels and the 200-day SMA at 15,007.

The indiscriminate selloff in yesterday’s last hour of trading into the close is a worrying sign. However, prices are nearing overbought on the daily RSI and through the lower Keltner band. Near-term support is 14,773 and then the October lower at 14,384.