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Alvin Chow 邹咏翰
wrote a post05/19/2022 10:26

US stocks selloff (again)

US stocks had their worst day since Covid year, 2020.
Dow Jones -3.6%
S&P 00 -4%
Nasdaq -4.7%

But the indices have not surpassed the recent low yet. I think new lows could be made in the coming days given that the bearish sentiment is still strong.

So much movements yesterday and it is good to do a quick battle damage assessment.

The big tech stocks couldn’t carry the market anymore. Even the powerful Apple fell more than the others, down 5.6%. Michael Burry should be happy with his short position. Berkshire managed to lose just 2.3% despite the big equity position in Apple.

Tesla was down 7% and we are not sure the exclusion of Tesla from the ESG index was part of the cause. It is quite counterintuitive for an EV company that is focused on clean energy transition got kicked out while an oil major ExxonMobil is included.

S&P explained that there were many data points which include “code of business conduct” and Tesla is being accused of racism in their workspace - black workers were given low-level and physically demanding roles.

Amazon fell 7% and this might be due to the retailers dragging it down. Retailers have flashed disappointing results. First it was Walmart which saw profits slashed as it couldn’t pass on all the cost increase to its customers. Its share price tanked 11% two days ago and another 7% yesterday.

The next target was Target which similarly reported earnings decline. Stock fell 25% in a day.

Here are other retailers with big price declines:
Best Price -11%
Macy’s -11%
Costco -12%
Dollar Tree -14%
Dillard’s -17%

These retailers are considered to be resilient in an inflationary environment as they offer necessities that people can’t stop buying. And that they should be able to pass down the costs to the customers. Apparently that is not happening and customers should breathe some relief. But that also means that stock investors have one less segment to seek protection from the bear market.

Every rebound now is a suspect. I don’t think the bottom is near but we also don’t know exactly when and where. That should not stop us from investing if we have the capital. This is a good time to dollar cost average as we buy more shares at lower prices. Then suddenly the bottom will happen and we will be in a good position to ride the recovery.
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