Upside down: Big Tech down, US curve steeper and JPY up [Video]

Underwhelming results from Tesla and Alphabet painted the equity markets in the red yesterday. The S&P 500 experienced its worst selloff since December 2022, Nasdaq 100 tumble as Roundhill’s Magnificent 7 ETF dropped more than 6% yesterday. Also, from a broader perspective, the fact that the Federal Reserve (Fed) cut expectations are rising is not positive for the Big Tech stocks as these behemoths were seen as a safe place to hide when the rates were high, and could see their advance wane due to a sector rotation. For the bears who were waiting in ambush, the time of correction may have come and could erase 10-15% from the S&P500 if the upcoming earnings can’t turn the wind.

In the FX, the fact that the Fed and the market is preparing to cut should keep the US dollar index under pressure, although the rising Fed cut bets also softens the dovish central bank expectations elsewhere and should limit the potential weakness of the greenback. The long yen trade is gaining momentum. The USDJPY fell to 152.23 due to rising bets on a Bank of Japan (BoJ) rate hike and the unwinding of carry positions. The major risk is that the Bank of Japan (BoJ) might refuse to hike next week, causing the entire long yen trade to collapse. But that’s probably just a bad thought.