Look to Fed to Stop Market Selloff: Barron’s Daily

“In a crisis, all correlations go to one” goes the old market saying.

While previous dips have looked like rotations away from tech, the worrying sign was that 407 of the index’s constituents fell.

While it’s not quite crisis time yet, a bout of market fear can still cause plenty of damage — and that will put pressure on the Federal Reserve, Adam Clark reported for Barron’s Daily.

Cryptocurrencies continue to be the market’s leading indicator of risk appetite, and Bitcoin crashed to a more than six-month low Monday. Perhaps more surprisingly, gold also fell.

The precious metal’s reputation as a haven might be overblown, considering the influx of retail traders investing in gold via exchange-traded funds, making it vulnerable to pullbacks.

It’s the same story for the stock market. The S&P 500 broke below its 50-day moving average for the first time in 139 trading sessions Monday.

While previous dips have looked like rotations away from tech, the worrying sign was that 407 of the index’s constituents fell.

Some concerns look valid. Artificial intelligence investment is increasingly expensive, with the likes of Amazon, Google, Meta, and Microsoft using around 95% of operating cash flows on capital expenditures, buybacks, and dividends.

That compares with around 80% in 2019, according to Goldman Sachs. It’s partly why they are having to increasingly turn to debt to fund the data center buildout — Amazon just raised $15 billion from its first US dollar bond offering in three years.

AI sentiment will be tested again with Nvidia’s most recent earnings.