Oct 03, 2023

The biggest stock names in the US have seen their valuations drop at a faster rate than the S&P 500.

SP500 Weekly Chart

SP500: Weekly Chart

The SP500 has been on the decline since the Fed meeting on Sept. 20 and now trades at 4,284.

Valuations for the Magnificent Seven: Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta, have dropped by 20% over the last two months, according to Goldman. In comparison, the S&P 500 has fallen 12%.

Stocks have slumped as the Federal Reserve has stayed hawkish on keeping interest rates higher for a longer period.

“What we all desire,” Fed Chair Jerome Powell said, “is a sustained period of strong labour market conditions,” which can boost wages for the lowest-income workers.

The S&P 500 was flat on Monday after a volatile session driven by rising Treasury yields and the averted US government shutdown due to a last-minute funding measure to keep the government open.

Treasury yields were pushed higher by expectations for another Federal Reserve interest rate hike, with the 2-year Treasury yield up 5.2 points to 5.098% and the 10-year yield rising 9.3 basis points to 4.667%. Around 30% of traders now expect the Fed to lift rates again next month, up from around 18% last week.

NVIDIA Corporation was up 2%, helped by the broader tech sector and after Goldman Sachs added the chipmaker to its “conviction buy list”. Nvidia is likely to be the “accelerated computing industry standard for the foreseeable future given its competitive moat and the urgency with which customers are developing and deploying increasingly complex AI models,” Goldman Sachs wrote.

Tesla was flat after saying Monday that it produced 430,488 vehicles in the third quarter, down from 479,700 in the previous quarter, due to a planned shutdown for factory upgrades. But the electric vehicle maker kept its full-year production guidance of around 1.8 million unchanged. Tesla will require a “strong 4Q” to hit this number, Wedbush said, adding it sees “better days ahead [for Tesla] for 4Q and 2024.”

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