After President Trump announced that “announcement“He will impose a new 25% tariff on computer chips imported from foreign countries. As of yesterday’s close, every one of the seven largest technology stocks was down. Yuan The biggest decline was 2.47%. Oracle (not in Mag 7, but closely related) fell 4.29%, perhaps because it is the hyperscaler most reliant on imported chips for its AI data center business.
The S&P 500 closed down 0.53%.
However, S&P futures are up 0.36% this morning before the open. Traders may be encouraged by the fact that investors in S&P 500 stocks are switching away from Mag 7. The index fell yesterday mainly due to the poor performance of the Mag 7. But the nominal “equal weight” S&P 500 actually rose 0.41%. It is up 3.62% this year, while the normal index is up just 1.18%.
This means traders are selling Mag 7 but buying most other stocks.
Deutsche Bank According to reports, 318 stocks in the S&P 500 index rose yesterday. “More broadly, there’s still a lot of resilience in the stock market, as most S&P components are still rising… Since the start of the year, we’ve seen more of a rotation pattern at work, with the small-cap Russell 2000 Index (+0.70%) setting a new record and outperforming the S&P 500 for the ninth straight session. In fact, the Russell 2000 Index is up +6.84% year to date, versus the Mag-7’s -1.49% decline,” Jim Reid and his team told customers this morning.
As usual, retail investors are leading the way, JPMorgan said. “This past week was a special one for retail, maintaining momentum from earlier in the year. Retail investors bought $12.0B in cash equities – the largest weekly inflow since the Liberation Day V-shaped recovery,” Arun Jain and his team told clients.
Most of that was purchased in exchange-traded funds, but $4.9 billion came from trades in single stocks. no Jain calculated that retail investors purchased tech stocks of non-Mag 7 companies at a standard deviation of 3.7 times above average.
It’s worth noting that the Mag 7 debacle was driven in part by policy announcements from the White House. On this topic, Pimco Chief Investment Officer Dan Ivascyn told the Financial Times It’s because the president’s economic policies are so volatile that he’s “diversifying” asset managers’ portfolios away from U.S. stocks.
“It’s important to realize this is a very unpredictable government,” he said. “We are diversifying… We do think we are in a period of diversification away from U.S. assets.”
ING’s Chris Turner said something similar in a report this morning. Referring to the sharp swings in oil prices triggered by Trump’s on-and-off threats to bomb Iran and the White House’s criminal investigation into Fed Chairman Jerome Powell, he said, “Investors remain reluctant to chase new themes emerging from Washington due to concerns about policy reversals. This may be why the dollar and Treasuries have not sold off in response to the legal investigation into Fed Chairman Powell. Ultimately, however, we believe this attack on the Fed will increase attacks on the Fed.” De-dollarization. ”
Here’s a snapshot of the market ahead of the opening bell in New York this morning:
- S&P 500 Index Futures are up 0.36% this morning. It closed down 0.53% on the previous trading day.
- Stoxx Europe 600 Index It rose 0.37% in early trading.
- UK FTSE 100 Index It was up about 5% in early trading.
- Japan’s Nikkei 225 Index down 0.42%.
- China CSI 300 rose 2%.
- Korea Composite Stock Price Index up 1.58%.
- Indian NIFTY 50 down 0.26%.
- Bitcoin rose to $96,700.