Tech Crumbled, Fear Spiked to Extreme, Defensives Led the Charge
Yesterday started with stretched valuations and quiet hedging, then turned sharply fearful by midday. The VIX, Wall Street's fear gauge, climbed from 18.1 in the morning to 18.8 by midday and closed at 19.0. The Fear and Greed Index collapsed from cautious territory to 20, deep into extreme fear. Stocks went from jittery to actively selling off, with tech leading the decline and defensive sectors catching the money flowing out. Utilities gained 2.1% and still sit 10% below their 52-week high, attracting investors fleeing tech. A second close above yesterday's level on rising volume would confirm the move. A 10-year Treasury yield reversal above 5.3% would threaten it. Homebuilders surged 5.4%, the biggest single-sector move of the day. The 10-year yield has fallen 0.3 points over two weeks, making mortgages more affordable. Watch for ITB to hold above 91 today as confirmation. A hot inflation print would quickly reverse the trade. Regional banks gained 2.5% and sit 7.6% below their 52-week high. The yield curve is steepening, with the 10-year at 5.1% versus the 2-year at 4.8%, which widens bank lending margins. KRE closing above 73 on above-average volume confirms the move. A credit scare kills it fast. Retail held up too, with XRT gaining 2.2% and sitting only 5.4% from its 52-week high, reflecting resilient consumer spending even as tech stumbled. Stock valuations remain elevated. The forward price-to-earnings ratio sits at 18.8, and trailing valuations are higher than roughly 76 out of 100 months since 2006. Protective puts on tech remain relatively affordable with the VIX still below 20. That window may not stay open long.
Source articles:
- Fear Spikes to Extreme as Tech Crumbles ā Defensives Catch the Bid
- Extreme Fear Hits as Tech Sells Off ā Defensives Take the Lead
- Earnings Jitters Meet Pricey Stocks ā Cheap Puts Are Your Best Defense
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