The sound investors heard on Tuesday was the slow hiss of deflating asset prices across the board. While the duration of the move lower is a no-brainer placement into the “it remains to be seen” file, it figures to continue as long as tech and energy stocks underperform.
The Dow Jones Industrial Average gained less than a quarter-point to 12,808, the Nasdaq fell 20 points to 2842 and the S&P 500 slipped 5 points to 1357.
We’ve noted that the bearish signals from large-cap tech were in place at the end of last week, and though Monday was technically a return to the green with a 0.01% rise, the Nasdaq 100 index is down three of the past four sessions and has dipped to essentially where it closed last Tuesday.
Even more importantly, perhaps, the index has fallen back to its late February highs – at the time, the high mark of 2011 – meaning that earnings season has come and (mostly) gone with absolutely no appreciation in major tech stocks in the past 10 weeks.
Tech-stock darling No. 1 Apple (NASDAQ:AAPL) is off nearly 4% during that time while runner-up Netflix (NASDAQ:NFLX) has slid more than 8% since April 21 alone.
Of course, energy prices – and related stocks – have also been a part of the market’s 30% rally over the past eight months, and Tuesday’s 2.2% drop in crude oil to just over $111 a barrel took the wind out of that sector.
An interesting footnote is that investors have now seen twice in one month a move by crude oil to around $114 a barrel, only to be followed by a move lower in oil, as well as stocks. While it would be foolish to predict the levels of both in the next three-to-six months, a near-term ceiling certainly seems to be in place.
However, the king of the asset deflation theme was silver, which sold off for the second straight session – to the tune of 8% — and continued lower in after-hours trading to mid-April lows. As noted on Monday, new margin requirements were hampering higher upside, but the global cooling-off theme was already in place.
The drop in both energy and precious metals also kicked small-caps lower overall – they being a favorite vehicle by traders in the past eight months in an attempt to find $5 gold and silver stocks and hang on until they get to $10.
The small-cap-focused Russell 2000 Index dropped 1.2% on Tuesday, and is back where it was at its March 31 close.
The best glimmer for bulls on Tuesday was a strong performance by financial stocks. The SPDR Financial Select Sector (NYSE:XLF) exchange-traded fund rose 0.4% and has risen steadily in the past two weeks. However, with financials still more than 4% from their 2011 highs, it’s not quite time to anoint a new market leader.
