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TSMC is being sold off despite strong earnings, and Nasdaq futures are also weak.
Tonight, rather than looking for buying opportunities, we should first identify where the selling pressure might stop.
Semiconductors are at the core.
Meanwhile, capital rotation into financial stocks has also begun.
However, if the VIX remains elevated, it's hard to turn bullish.
There’s also a sense of unease that individual stocks are weaker than the broader indices.
The unease tonight stems from the fact that, despite TSMC’s strong earnings, buying hasn’t spread across the broader semiconductor sector.
Profit-taking driven by concerns over high valuations is outweighing positive earnings performance.
There are three key points to keep in mind first.
NASDAQ futures
If the decline narrows, large-cap growth stocks become more likely to see buying interest.
If new lows are made, selling pressure could easily spread across the entire AI-related sector.
VIX
If it declines further, dip-buying is likely to emerge.
If it remains elevated, high-P/E stocks will still be difficult to touch.
The 10-year US Treasury yield
If it declines, that would be a tailwind for growth stocks.
If it stays elevated, any rebound will likely face strong selling pressure.
Tonight's spotlight is on two key themes...