Latest news with #BloombergMagnificent7Index
Yahoo
19 hours ago
- Business
- Yahoo
Options Traders Brace for Big Tech Selloff With ‘Disaster' Puts
(Bloomberg) -- Options traders are increasingly nervous about a plunge in technology stocks in the coming weeks and are grabbing insurance to protect themselves from a wipeout. The tech-heavy Nasdaq 100 Index is up almost 40% since its early April plunge triggered by President Donald Trump's sweeping tariffs. The rally has been propelled by big tech, with the Bloomberg Magnificent 7 Index — which contains the likes of Nvidia Corp., Meta Platforms Inc. and Microsoft Corp. — soaring nearly 50% since its April 8 bottom. Chicago Schools Seeks $1 Billion of Short-Term Debt as Cash Gone A Photographer's Pipe Dream: Capturing New York's Vast Water System A London Apartment Tower With Echoes of Victorian Rail and Ancient Rome Why New York City Has a Fleet of New EVs From a Dead Carmaker Princeton Plans New Budget Cuts as Pressure From Trump Builds The concern, however, is that those gains are hiding areas of weakness lurking beneath the market's surface. And there are potential triggers for a drop coming up, from Federal Reserve's Jackson Hole symposium starting in a few days to Nvidia's earnings next week. Traders are 'less concerned' about a 'normal run-of-the-mill pullback' and seem to be more worried about a repeat of the April selloff, said Jeff Jacobson, head of derivative strategy at 22V Research Group, who thinks a shallower dip is more likely. Traders are buying 'disaster' puts on the Invesco QQQ Trust Series 1 ETF, which tracks the Nasdaq 100 Index, Jacobson said. Put options give investors the right to sell the underlying security at a certain price, and are popular as a way of protecting against a market drop. A measure showing the difference between the cost of hedging against a sharp downturn and a smaller one is at an almost three-year high, Jacobson said. Fears of a bubble are mounting, as tech stocks follow a pattern that is 'surprisingly similar' to the dot-com bubble of the late 1990s, Torsten Slok, chief economist at Apollo Management, wrote in a note to clients on Monday. Meanwhile, Michael Hartnett, chief investment strategist at Bank of America Corp., has been warning of a bubble forming in risk assets since December and predicts that US stocks will drop after the Fed's Jackson Hole symposium ends on Friday. Myriad Risks 'The market's had such a big run,' Jacobson said. 'A myriad of things' could send big tech tumbling. For example, there are worries about the impact of artificial intelligence on software companies, which has helped push Salesforce Inc.'s share price down 27% this year. And the Magnificent 7 rally could come to an end if tariff-driven inflation forces the Fed to curtail interest rate cuts that the market has already priced in. 'It could be a rotation out of those the Mag Seven names into some of the other areas that have lagged,' Jacobson said. 'It could be 'sell the news' when you have Nvidia earnings in the next few weeks. We could even get a 'sell the news' out of Jackson Hole.' The elevated put skew indicates that traders are hedging against a repeat of the tariff tantrum in April, according to Jacobson. He sees that fear as overblown. While the Nasdaq 100 sank more than 20% from its Feb. 9 high to its April 8 low, that kind of move is extremely unusual. Over the last 18 months, the average selloff in the Nasdaq 100 has been around 12.5%, Jacobson said. To bet on a correction in the ETF, Jacobson suggests a number of trades including buying a put ratio spread, in which cost of insuring against a shallower drop is partially funded by selling insurance against a deeper, April-style plunge. Specifically, Jacobson encourages traders to buy $570 puts in QQQ that expire on Oct. 17, and that they fund the trade by selling twice as many $515 puts in QQQ. The trade should make money if the index falls by roughly 2% and no more than 11%, he said. The $515 level is the ETF's 200-day moving average, which he believes will act as a floor in the event of a pullback. Not everyone on Wall Street is convinced that investors should be shorting the best performing of the major US equity indexes over the last decade. JPMorgan Chase & Co. cross-asset strategists, for instance, suggest shorting the small-capitalization Russell 2000 Index and going long the Nasdaq 100. Jacobson, however, is more pessimistic about big tech's immediate future. 'Clearly, there's a possibility, right?' he asked rhetorically. 'You have just a, such a strong concentration in these names. It wouldn't take much.' Foreigners Are Buying US Homes Again While Americans Get Sidelined What Declining Cardboard Box Sales Tell Us About the US Economy Women's Earnings Never Really Recover After They Have Children Americans Are Getting Priced Out of Homeownership at Record Rates Yosemite Employee Fired After Flying Trans Pride Flag ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
Options Traders Brace for Big Tech Selloff With ‘Disaster' Puts
(Bloomberg) -- Options traders are increasingly nervous about a plunge in technology stocks in the coming weeks and are grabbing insurance to protect themselves from a wipeout. The tech-heavy Nasdaq 100 Index is up almost 40% since its early April plunge triggered by President Donald Trump's sweeping tariffs. The rally has been propelled by big tech, with the Bloomberg Magnificent 7 Index — which contains the likes of Nvidia Corp., Meta Platforms Inc. and Microsoft Corp. — soaring nearly 50% since its April 8 bottom. Chicago Schools Seeks $1 Billion of Short-Term Debt as Cash Gone A Photographer's Pipe Dream: Capturing New York's Vast Water System A London Apartment Tower With Echoes of Victorian Rail and Ancient Rome Why New York City Has a Fleet of New EVs From a Dead Carmaker Princeton Plans New Budget Cuts as Pressure From Trump Builds The concern, however, is that those gains are hiding areas of weakness lurking beneath the market's surface. And there are potential triggers for a drop coming up, from Federal Reserve's Jackson Hole symposium starting in a few days to Nvidia's earnings next week. Traders are 'less concerned' about a 'normal run-of-the-mill pullback' and seem to be more worried about a repeat of the April selloff, said Jeff Jacobson, head of derivative strategy at 22V Research Group, who thinks a shallower dip is more likely. Traders are buying 'disaster' puts on the Invesco QQQ Trust Series 1 ETF, which tracks the Nasdaq 100 Index, Jacobson said. Put options give investors the right to sell the underlying security at a certain price, and are popular as a way of protecting against a market drop. A measure showing the difference between the cost of hedging against a sharp downturn and a smaller one is at an almost three-year high, Jacobson said. Fears of a bubble are mounting, as tech stocks follow a pattern that is 'surprisingly similar' to the dot-com bubble of the late 1990s, Torsten Slok, chief economist at Apollo Management, wrote in a note to clients on Monday. Meanwhile, Michael Hartnett, chief investment strategist at Bank of America Corp., has been warning of a bubble forming in risk assets since December and predicts that US stocks will drop after the Fed's Jackson Hole symposium ends on Friday. Myriad Risks 'The market's had such a big run,' Jacobson said. 'A myriad of things' could send big tech tumbling. For example, there are worries about the impact of artificial intelligence on software companies, which has helped push Salesforce Inc.'s share price down 27% this year. And the Magnificent 7 rally could come to an end if tariff-driven inflation forces the Fed to curtail interest rate cuts that the market has already priced in. 'It could be a rotation out of those the Mag Seven names into some of the other areas that have lagged,' Jacobson said. 'It could be 'sell the news' when you have Nvidia earnings in the next few weeks. We could even get a 'sell the news' out of Jackson Hole.' The elevated put skew indicates that traders are hedging against a repeat of the tariff tantrum in April, according to Jacobson. He sees that fear as overblown. While the Nasdaq 100 sank more than 20% from its Feb. 9 high to its April 8 low, that kind of move is extremely unusual. Over the last 18 months, the average selloff in the Nasdaq 100 has been around 12.5%, Jacobson said. To bet on a correction in the ETF, Jacobson suggests a number of trades including buying a put ratio spread, in which cost of insuring against a shallower drop is partially funded by selling insurance against a deeper, April-style plunge. Specifically, Jacobson encourages traders to buy $570 puts in QQQ that expire on Oct. 17, and that they fund the trade by selling twice as many $515 puts in QQQ. The trade should make money if the index falls by roughly 2% and no more than 11%, he said. The $515 level is the ETF's 200-day moving average, which he believes will act as a floor in the event of a pullback. Not everyone on Wall Street is convinced that investors should be shorting the best performing of the major US equity indexes over the last decade. JPMorgan Chase & Co. cross-asset strategists, for instance, suggest shorting the small-capitalization Russell 2000 Index and going long the Nasdaq 100. Jacobson, however, is more pessimistic about big tech's immediate future. 'Clearly, there's a possibility, right?' he asked rhetorically. 'You have just a, such a strong concentration in these names. It wouldn't take much.' Foreigners Are Buying US Homes Again While Americans Get Sidelined What Declining Cardboard Box Sales Tell Us About the US Economy Women's Earnings Never Really Recover After They Have Children Americans Are Getting Priced Out of Homeownership at Record Rates Yosemite Employee Fired After Flying Trans Pride Flag ©2025 Bloomberg L.P.
Business Times
2 days ago
- Business
- Business Times
Options traders brace for Big Tech sell-off with ‘disaster' puts
[NEW YORK] Options traders are increasingly nervous about a plunge in technology stocks in the coming weeks and are grabbing insurance to protect themselves from a wipeout. The tech-heavy Nasdaq 100 Index is up almost 40 per cent since its early April plunge triggered by US President Donald Trump's sweeping tariffs. The rally has been propelled by big tech, with the Bloomberg Magnificent 7 Index – which contains the likes of Nvidia, Meta Platforms and Microsoft – soaring nearly 50 per cent since its Apr 8 bottom. The concern, however, is that those gains are hiding areas of weakness lurking beneath the market's surface. And there are potential triggers for a drop coming up, from Federal Reserve's Jackson Hole symposium starting in a few days to Nvidia's earnings next week. Traders are 'less concerned' about a 'normal run-of-the-mill pullback' and seem to be more worried about a repeat of the April sell-off, said Jeff Jacobson, head of derivative strategy at 22V Research Group, who thinks a shallower dip is more likely. Traders are buying 'disaster' puts on the Invesco QQQ Trust Series 1 ETF, which tracks the Nasdaq 100 Index, Jacobson said. Put options give investors the right to sell the underlying security at a certain price, and are popular as a way of protecting against a market drop. A measure showing the difference between the cost of hedging against a sharp downturn and a smaller one is at an almost three-year high, Jacobson said. Fears of a bubble are mounting, as tech stocks follow a pattern that is 'surprisingly similar' to the dot-com bubble of the late 1990s, Torsten Slok, chief economist at Apollo Management, wrote in a note to clients on Monday (Aug 18). Meanwhile, Michael Hartnett, chief investment strategist at Bank of America, has been warning of a bubble forming in risk assets since December and predicts that US stocks will drop after the Fed's Jackson Hole symposium ends on Friday. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Myriad risks 'The market's had such a big run,' Jacobson said. 'A myriad of things' could send big tech tumbling. For example, there are worries about the impact of artificial intelligence on software companies, which has helped push Salesforce's share price down 27 per cent this year. And the Magnificent 7 rally could come to an end if tariff-driven inflation forces the Fed to curtail interest rate cuts that the market has already priced in. 'It could be a rotation out of those the Mag Seven names into some of the other areas that have lagged,' Jacobson said. 'It could be 'sell the news' when you have Nvidia earnings in the next few weeks. We could even get a 'sell the news' out of Jackson Hole.' The elevated put skew indicates that traders are hedging against a repeat of the tariff tantrum in April, according to Jacobson. He sees that fear as overblown. While the Nasdaq 100 sank more than 20 per cent from its Feb 9 high to its Apr 8 low, that kind of move is extremely unusual. Over the last 18 months, the average sell-off in the Nasdaq 100 has been around 12.5 per cent, Jacobson said. To bet on a correction in the ETF, Jacobson suggests a number of trades including buying a put ratio spread, in which cost of insuring against a shallower drop is partially funded by selling insurance against a deeper, April-style plunge. Specifically, Jacobson encourages traders to buy US$570 puts in QQQ that expire on Oct 17, and that they fund the trade by selling twice as many US$515 puts in QQQ. The trade should make money if the index falls by roughly 2 per cent and no more than 11 per cent, he said. The US$515 level is the ETF's 200-day moving average, which he believes will act as a floor in the event of a pullback. Not everyone on Wall Street is convinced that investors should be shorting the best performing of the major US equity indexes over the last decade. JPMorgan Chase cross-asset strategists, for instance, suggest shorting the small-capitalization Russell 2000 Index and going long the Nasdaq 100. Jacobson, however, is more pessimistic about big tech's immediate future. 'Clearly, there's a possibility, right?' he asked rhetorically. 'You have just a, such a strong concentration in these names. It wouldn't take much.' BLOOMBERG
Business Times
18-05-2025
- Business
- Business Times
Big Tech goes from stock market's safest bet to biggest question
FOR most of the past decade, a handful of high-flying technology companies have pushed the US stock market to record highs and become cornerstones of investment portfolios. But that's collapsed this year. Despite the S&P 500 Index clawing back into the green for 2025 after being whipsawed by President Donald Trump's vacillating trade policies, tech giants like Apple, Alphabet, and Tesla are still down. The Bloomberg Magnificent 7 Index – which includes those companies as well as Meta Platforms, Microsoft and Nvidia – is underperforming the S&P 500, and if that holds through Dec 31, it would make this just the second year in the last 10 where that's happened. It's a far cry from last year, when technology and telecommunications stocks both rose more than 35 per cent to lead the S&P 500's 23 per cent gain. This year, typically lagging groups like industrials, utilities and financials are driving the stock market's rebound. Whether Big Tech can re-establish its historical dominance in 2025 is the existential question facing investors as they start positioning for the back half of the year. 'The market is starting to look back more at individual stocks and companies and financial strength and innovation rather than letting the uncertainty around tariffs and where they may go really dominate the conversation,' said Rick Gardner, chief investment officer at RGA Investments. 'And if you want to start talking about the US economy and you want to start talking about technology, that's a really bright story.' Gardner has been buying Big Tech stocks for his clients over the past month as the market has rebounded but they've languished. He's not alone. Signs are emerging that professional traders are increasingly wading back in after slashing equity positioning amid the economic uncertainty triggered by Trump's global trade war. For example, hedge funds on Tuesday snapped up US equities at the fastest pace since Apr 9, the day the S&P 500 soared 9.5 per cent after Trump announced his tariff reprieve, according to Goldman Sachs' prime brokerage desk. Technology stocks were the biggest beneficiaries of the buying. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Not a good setup The flipside of this optimism is the reality that tech stocks have had a massive run-up over the past few years, and with the economy in flux the risk is these shares could have much more room to fall. Betting on Big Tech a decade ago resulted in a gain of 2,179 per cent, compared with 181 per cent for the S&P 500, excluding dividends. 'I think we're going to stall out here,' Lisa Shalett, Morgan Stanley's chief investment officer, said on Friday (May 16) in an interview. 'It's hard to justify the numbers.' Hedge fund manager Michael Burry, who's famous for his 2008 bet against the housing market that was featured in The Big Short, bought put options, which profit from price declines, on Nvidia in the first quarter, according to the latest 13F regulatory filing by his firm, Scion Asset Management. However, the filing also added a note that the securities 'may serve to hedge long positions which are not eligible to be reported'. That said, the stock market's big 'what if' question is: If those Big Tech laggards start to outperform again, what does that mean for the S&P 500? The Magnificent Seven accounts for about a third of the benchmark's market capitalisation. So if the mega-tech index, which is down 4.2 per cent for the year compared with a 1.3 per cent rise in the S&P 500, reverses course and takes the lead, how much does the S&P rally? 'I think all-time highs are possible,' Gardner said. 'I would hate to be the one betting against our technology industry and innovation right now.' He has a point, since the S&P 500 bottomed on April, tech stocks have led the way higher, with the sector rising 31 per cent compared with a 20 per cent gain for the entire index. Of course, not all Big Tech stocks have been underperformers this year. Meta Platforms is up 9.4 per cent to lead the Magnificent Seven, while Microsoft has gained 7.8 per cent. Both have limited exposure to tariffs and posted better-than-expected earnings results. Nvidia, which reports on May 28, is roughly flat for 2025. Betting on a tech rally comes with its own risks. Trump could resume his hard-line approach to tariffs when his 90-day pause ends in July. And the jury is still out on whether a demand shock from his levies will derail the US economic expansion and cause inflation to flare up again. Economic fears So far businesses have absorbed most of the costs from Trump's tariffs, but Walmart said in its earnings report last week that consumers will start to see higher prices soon as it works through inventory and begins to pass on the expense of newer merchandise. Meanwhile, US consumer sentiment is at the second-lowest level on record and inflation expectations are at multi-decade highs, according to the monthly survey by the University of Michigan. While the factors weighing on big tech laggards vary, the common challenge most of them face is exposure to China, which has been hit with the highest tariffs by the Trump administration. For instance, the majority of Apple's most important device, the iPhone, are still mostly made in China, and the country accounted for 17 per cent of its 2024 revenue, according to data compiled by Bloomberg. The company earlier this month reported a 2 per cent decline in China sales in its fiscal second quarter, short of analyst expectations. Apple has lost more than US$700 billion in market value since closing at a record on Dec 26 and is now worth less than Microsoft and Nvidia. Alphabet, meanwhile, faces mounting concerns about risks to its Google search business from artificial intelligence chatbots like OpenAI's ChatGPT. Searches on Apple's Safari web browser fell for the first time in April, an Apple executive said in court testimony last week. Still, hope for equity investors remains. In many ways the most encouraging sign for the stock market has been the S&P 500's ability to rebound without big tech companies leading, according to George Maris, chief investment officer and global head of equities at Principal Asset Management. 'You don't necessarily need the largest capitalisation securities to do great for a good, constructive market,' he said. 'You probably have a healthier market, a healthier, more fundamentally-oriented market, if you have greater participation across the investment universe.' BLOOMBERG
Yahoo
26-03-2025
- Business
- Yahoo
Amazon Allure Grows With Cheaper Shares Than Apple, Walmart
(Bloomberg) -- Inc. shares are starting to look like a bargain, a word that has rarely been used to describe the stock. They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Why Did the Government Declare War on My Adorable Tiny Truck? Trump Slashed International Aid. Geneva Is Feeling the Impact. How SUVs Are Making Traffic Worse Paris Votes to Make 500 More Streets Car-Free The recent drop in the company's share price — coupled with expectations for durable long-term earnings growth — have brought its valuation to levels rarely seen since the company went public in 1997. This could limit additional downside in the event of further weakness in the broader market. 'You'd be hard pressed to look at Amazon's multiple here and not see it as appealing relative to both tech and retail, and given its multiple secular tailwinds, this looks like an incredible opportunity,' said Clayton Allison, portfolio manager at Prime Capital Financial. While tech valuations have fallen broadly in the recent market selloff, the ratio of Amazon's price to its earnings stands out relative to its history. The stock is trading at around 28 times its estimated future earnings, which is roughly half the 10-year average, and below that of major retail rivals that used to have lower multiples like Walmart Inc. and Costco Wholesale Corp. It also trades at a discount to Apple Inc., which was several times cheaper than Amazon just a few years ago. The valuation has fallen in recent years because Amazon has focused on efficiency and cost cutting, which has lifted its profitability. In the short term, though, the hit has largely been a result of the broader market selloff. Amazon shares are 6.3% lower this year, and are coming off seven straight weekly declines, the longest such streak since May 2022. While Amazon is lagging the Nasdaq 100 Index since the beginning of the year, it has performed modestly better than the Bloomberg Magnificent 7 Index. The stock dipped 0.1% on Wednesday. Wall Street remains almost uniformly positive on the fundamentals of Amazon's e-commerce and cloud-computing business, Amazon Web Services. More than 95% of the analysts tracked by Bloomberg recommend buying the shares. It also trades more than 30% below the average analyst price target. Brian White, an analyst at Monness Crespi Hardt & Co., recently affirmed a buy rating and $265 price target on the stock, writing that Amazon's profitability is below its long-term potential. 'The company's long-term growth path is attractive across the e-commerce segment, AWS, digital media, advertising, Alexa, robotics, AI, and more,' he added. The company recently unveiled an artificial intelligence-powered version of its Alexa voice-activated assistant product, which analysts see as supporting the company's growth. Revenue at Amazon is expected to rise 9.6% this year and hit a 10.4% pace in 2026, driving net earnings from 15% in 2025 to 20% next year. There are, though, near-term clouds for Amazon, as tariffs and broader economic uncertainty weigh on the outlook for both consumer spending and the adoption of AI services. Amazon's most recent results paint a mixed picture for AI. AWS revenue grew 19%, but didn't accelerate as much as anticipated. The company said its cloud business was facing capacity constraints — echoing Microsoft Corp., which is also struggling to meet AI-related demand. Amazon said it would invest about $100 billion this year, mostly on AI-related expenditures like data centers and other infrastructure. Investors have become increasingly focused on when the heavy spending on AI will pay off in a more concrete fashion. This issue, coupled with the broader questions about the economy, could limit the ability of big tech stocks to rebound, even with the more attractive multiples. 'There was over-enthusiasm surrounding big tech earlier this year, and while we are getting to levels where they look attractive again, good fundamentals or multiples don't really matter when there's so much uncertainty,' said Kristian Kerr, head of macro strategy for LPL Financial. 'We need a lot more clarity for a sustainable move higher.' Top Tech News Apple Inc.'s Chief Executive Officer Tim Cook visited China's artificial intelligence hub of Hangzhou, the home of AI sensation DeepSeek which shocked the world with its models built at a fraction of the cost of American rivals. Nintendo Co. shares gained the most in over seven months after Goldman Sachs Group Inc. said it expects the upcoming release of its Switch 2 console to drive active users to new highs. OpenAI is making it easier to edit images in ChatGPT and create visuals for work that include lengthy, legible text, potentially broadening the chatbot's appeal for businesses and everyday users. Alibaba Group Holding Ltd. and BMW AG will team up to produce AI for cars in China, as the tech giant looks to monetize its emerging products and the German automaker seeks to catch up to local brands that are dominating the key market. Vietnam will allow Elon Musk's Starlink to provide satellite internet services in the country for a pilot period of five years, with a maximum of 600,000 subscribers, after the government pushed through regulatory changes. Earnings Due Wednesday Premarket JinkoSolar Postmarket Verint Cheetah Mobile Zepp Health --With assistance from David Watkins. (Updates to market open.) Business Schools Are Back Google Is Searching for an Answer to ChatGPT The Richest Americans Kept the Economy Booming. What Happens When They Stop Spending? A New 'China Shock' Is Destroying Jobs Around the World How TD Became America's Most Convenient Bank for Money Launderers ©2025 Bloomberg L.P. Sign in to access your portfolio
