Instability At Warp Speed

Headlines for western markets on Wednesday revolved around some iteration on the narrative that equities are attempting to rise “despite” an unexplained illness that prompted AstraZeneca to halt immunizations in an experimental coronavirus vaccine trial, but that’s probably not the correct way to frame things.

Rather, after three days of losses for big-cap US tech and with the Nasdaq 100 now squarely in correction territory, US stocks, to the extent they do manage to rebound, were due for a decent day, and a stalled vaccine trial is as good a reason as any for dip-buying in shares that benefited from the stay-at-home trade.

Of course, the rout stateside could just as easily continue given the rather combustible setup. Asia in many ways reflected the tech pain Wednesday, with SoftBank logging yet another loss. Although the shares managed to close well off the lows, the multi-day slide is adding up.

Chief compliance officer Chad Fentress departed, SoftBank confirmed. Fentress also abdicated his seat on WeWork’s board. Separately, reports indicate SoftBank has orders for the entirety of the $12 billion in shares it’s selling in its Japanese wireless operation. That’s just more cash to deploy on buybacks and at the slot machines, I suppose.

Speaking of slot machines, one Singapore-based analyst told Bloomberg it’s not the “actual exposure” from Masayoshi Son’s “whale” trades that has folks spooked. Rather, “investors are very wary about ‘style drift”.

“While not wholly unexpected nor unhealthy that some of the air leaks out of a very inflated market balloon, the move higher in the US dollar and the impact it’s having on broader risk assets such as commodities is a cause for concern and may limit any regular rotation out of Tech into the reopening pockets of the market”, AxiCorp’s Stephen Innes said Wednesday. “Or at least things could be delayed until we clear the ECB and the Fed over the next week”.

In another sign of global tech angst, the ChiNext was crushed Wednesday, despite Nasdaq futures rebounding during the Asian session. Biotech stocks were actually the locus of pain.

Meanwhile, developing nation equities more broadly are mired in the longest losing streak in eight months.

Investors cite a laundry list of reasons for emerging market stocks’ six-session slide, including US election jitters and India’s inability to control the virus.

It all adds up to a less than perfect backdrop, with vaccine headlines likely to play heavily into the narrative Wednesday, in the absence of some additional talking point.

“Given that this was seen by many as the leader in the vaccine race, this is a blow”, Deutsche Bank said of the AstraZeneca news. “It reminds us why the process is usually multiple times slower than what is occurring with the COVID trials”.

Right. But “warp speed”, and such.

Commenting in a Tuesday evening note, JonesTrading’s Mike O’Rourke said the last several days “give the appearance that the summer rally was likely a blow-off”. “Where and when the index finds meaningful stability will be important”, he added.