THE DAY EVERYTHING ROSE TO FALL: Stocks Fall, Even Nvidia Falls, Bitcoin Falls, and Jobs Fall
Today was a "what goes up must come down" day as things soared when day broke and then tumbled out of a stormy sky by day's end.
Even the “Duke of Doom” here at The Daily Doom was not negative enough on his prediction yesterday that the hyper-achieving results reported by Nvidia would not lift the stock market for long:
A nice boost for investors to be thankful for on the holiday next Thursday can be expected in the markets tomorrow. However, the bigger question is how long will it last? I am inclined to think it will be short. May not outlive this week. In the past when the stock market has been in the process of a big downturn, I’ve sometimes predicted a sudden boost as a one-off that would start to fade in a day or two and then, in a week we’d see the bottom drop out as investors realized that even the great news didn’t hold on. That has panned out. (“The Bureau of Lying Statistics Reports the TRUTH”)
The boost not only didn’t outlive the week. It didn’t outlive the day! Hours after the big boom hit, it faded completely away, turning stocks deeply negative by the end of the trading day.
What was funny was to see how quickly the mainstream financial press did the predictable and claimed the morning boom was proof there was plenty of life still in AI stocks. Look at one of the headlines in the section below for paying subscribers, which claimed “NVIDEA BLOWS AWAY BUBBLE FEARS,” and then click the link to find out how they scrambled to revise the headline and the article well before the day was even done. Then look at how far down the toilet stocks went in that report. So much for “blows away bubble fears. Nearly everything fell and fell pretty hard, especially the Nasdaq, which ended down almost 500 points!
The Wall Street Journal made the same mistake, claiming “Nvidia’s Strong Results Show AI Fears Are Premature.” Ooops. Guess not. That claim, they wrote at 5:30 AM ET. By the end of the day, the Dow had not only lost its 700 point market boost, but had fallen negative, and the Nasdaq, laden as it is with those AI and high-tech companies that were deemed indestructible by all the market mavens earlier in the year, tumbled more than 2%.
Bullish investors lost their nerve and a brief stock market rally on Thursday quickly stalled, with Wall Street’s major indexes giving up early gains as concerns about overvalued artificial intelligence companies crept back into the market.
Crept back? Are you kidding me? They SLAMMED back like throwing the transmission into reverse while you’re throttling forward at sixty miles per hour!
The worst part was that even Nvidea gave up the few hours of big gains that it got from its report, which came out after stocks closed yesterday. It started the day accelerating upward by a screaming 5%; by the end of the day, that glowing report landed even Nvidea down 3%!
Now that’s bad when Nvidea—which had a sparkling, positive report for revenue, profits, orders, and its forecast expectations—can’t even get a day of float out of all that good news but gets taken own by the overall flush in AI stocks by investors who have grown weary and wary of the lack of profits in the broader AI market and with companies’ stock valuations. That is quite an undertow from investors who were the last ones to realize (or, at least, to care) that AI stocks have become insanely overvalued, starting to see, in recent weeks, the light of day.
The WSJ might want to rethink what they said:
Bubbles by their nature don’t deflate slowly. But some air coming out of artificial-intelligence enthusiasm might actually turn out to be helpful for Nvidia.
Nothing helped Nvidea in this rapid downturn, which sank Nvidia and all stocks more quickly than even The Daily Doom anticipated (though only by a matter of days).
With limited foresight, CNBC started out the day by crooning,
The blowout quarter [for Nvidia] exceeded even the whisper numbers for the AI chip leader, and while most major analysts commented on and touted the positives, Ross Seymore at Deutsche Bank noted that the shares are “fairly valued.”
Nvidia’s upbeat guidance helped lift investor sentiment around the AI trade.
Guess not! Nvidia’s shares got a little needed devaluation today. But there pre-climax report went even further astray from how the day would expire:
The results boosted a slew of stocks across the AI ecosystem immecdiately following the report, including chipmakers Advanced Micro Devices and Broadcom and power infrastructure companies such as Eaton.
Until they didn’t!
While I have been warning for a few weeks that the market was looking poised for a big fall, a Nvidea fail just a few hours after a splendid report that the market had been salivating for as everyone clung to the last brass ring for life support came even faster than I was expecting. Still, that is the kind of thing that happens when delusions finally give way to reality—as I wrote in my recent Wile E. Coyote analogy of looking down and finding out how far past terra firma you have run.
Of course, there are still those in the financial media who are clinging to their rose-colored glasses:
Some investors remained optimistic on Thursday, however.
“I think today could well be the final washout the market needed,” said Jeff Mills, chief investment officer at Bessemer Trust, a fund manager. He noted the recent strong earnings season and solid job growth reported for September.
Sounds like something said by a man who has been telling his clients to hang in there through the rough ride, and they’ll be rewarded.
Nevertheless, I wouldn’t be surprised if the market rebounds tomorrow as investors try to recover their balance. What I’ve seen in the past with these big turns, is that the stubbornness to hold out against economic reality has reached incredible levels of irrationality where investors will reach for anything they can, like this guy does, to find a reason to rise again. As a result, the market will lurch upward a little after a surprise downdraft like we saw today, hoping it was a one-off or was final pressure relief; yet, the market still winds up grinding its ways down over a week or two.
Then some big, ugly economic news comes, as it certainly will because the economy is, as reported here yesterday, clearly deteriorating rapidly all around us; and that becomes the final scale tipper that shocks hold-out investors with the horror of the economic realities they have been still trying not to believe in. That is when the really big flush starts that takes stocks down 1,000, 2,000, maybe even more points in a day.
The denial and sheer lunacy in the face of the fall remain incredibly stubborn about giving up on that greed, as we also got to see today:
“Generally speaking, corporate America continues to perform well,” Mr. Mills said.
Perform well? With all of these job cuts that have been masked by the government shutdown but are showing up in non-government reports. Perform well when small businesses are reporting that the tariff chaos has been crippling, as I wrote about this week? Keep the blinders on, Man. They are obviously doing what they are supposed to for you—keeping you, like a race horse, from seeing anything other than what is straight ahead where your head is pointed. All the other horses can be stumbling around you, and you wouldn’t see it.
The job flush
Speaking of those jobs, the government’s September report came in about as I would have expected, showing that, even back at the end of summer, those American corporations that were just claimed above to have continued “to perform well” were not performing so well.
Today’s glitter-coated BLS number of net new jobs for the last month of summer was 119,000, which was well below the 150,000 level that indicates a slide into recession if the numbers continue to be that low. (And we know from all those non-government reports that we got while the government was shut down that the number in the months after September went from that low net gain to outright net losses.)
Jobs for August got revised down to -4,000. July was also revised down by 7,000 jobs to a mere 72,000 clear back in the middle of summer. If September follows the pattern of most months reported by the BLS this year, it will be revised downward in another month, too.
While the BLS pulled its BS of not being able to report the unemployment rate for October, the unemployment rate for September was reported today as 4.4%, which meant it was already the highest it had been since October 2021 when we were still working our way back up out of the Covid-lockdown, government-imposed economic crisis that gave us the highest unemployment since the Great Depression. We know for sure, based on the non-government reports that unemployment has risen significantly since September. (We don’t know, however, that the Bureau of Increasingly Lying Statistics will ever report that truth now that everyone there knows that even the highest person in the bureau can be fired if numbers are less glowing than Trump orange.)