Zombieland.

Calling it a “reckoning” would be a stretch considering the sheer scope of the rally that preceded what is now a two-day rout in US equities.

So, let’s just call it a “reality check” instead.

Whatever you want to call it, note that Monday marked the worst underperformance for tech shares since October. It was the worst day in absolute terms for the S&P Info Tech index since August.

The Nasdaq 100 – the poster child for the recent melt-up – has fallen nearly 3% over the past two sessions. And just in time for the heavyweights to either confirm the relative wisdom of the recent run-up, or call bullsh*t on a rally that pushed valuations to 23X.

Remember, earnings growth for Info Tech has been negative for three straight quarters. And yet, tech shares have lapped the broader market over the past year, pushing the 14-week RSI above 80 for the only the fifth time in nearly 30 years (see the top pane below). It’s now back down to 73, but still in overbought territory.

The Nasdaq VIX rose the most Monday since the day the 2s10s curve inverted in mid-August.

In bond land, a 5-year auction tailed, but it didn’t matter. Yields were lower by 5-8bps across the curve, which bull flattened (again). The 2s10s tightened inside of 16bps. This is not what “reflation” looks like:

Futures volumes were 55% above the 20-day average in 10-year contracts, Bloomberg notes.

“The uncertainties which have characterized trading to begin 2020 have offered a bullish backdrop to the rates market, even as the economic fundamentals have been solid”, BMO said Monday, adding that “domestic yields have chosen to focus on the volatility in the Middle East and specter of a more widespread coronavirus outbreak as opposed to the hard data”.

You can say that again. Of course, the main worry is that the data will eventually be affected. The reason stocks are selling off on scary-sounding virus headlines isn’t because anyone fears the apocalypse, but rather because investors are worried that if it keeps spreading, it will derail the nascent bounce in global growth. Because the epicenter is in China, those fears are particularly acute, given that recent upbeat data out of Beijing is part and parcel of everyone’s “growth inflection,” narrative.

Emerging markets are naturally getting hit harder than anything. Believe it or not, Monday was the second-worst single session since Vol-pocalypse for the EM ETF. It’s down more than 5% over the last three days.

A quick look at the credit ETFs reveals a cringe-worthy nosedive in HYG.

Oil is obviously in the middle of a harrowing slide (see more details here) as the same growth concerns which are spooking equities have crude bulls fretting anew about the outlook for demand. Last week was the worst week for Brent since December 2018, and if Monday was any indication, things have the potential to get worse before they get better.

Ultimately, it’s wait-and-see mode for those who aren’t inclined to panic-sell. But it’s important to remember that things may look entirely different by the time the week is over. Between tech earnings and the Fed, the “fun” is just getting started.

And that’s to say nothing of the whole John Bolton “issue“.

As for the virus, I asked a friend in Hong Kong yesterday what it’s like to be on the frontlines of the zombie apocalypse. “It is apocalyptic”, she remarked. “Very few people on the streets, everyone wearing face masks”.