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A 4% drop will put the Nasdaq back to Nov 2021. Amazon, Tesla, and Alphabet already back where they’d been 3 or 4 years ago. Nvidia -24% from peak.
By Wolf Richter for WOLF STREET.
Rate cuts are coming, they’re going to happen starting September 18. The stock market’s dreams are getting closer. Until July, rate cut mania whipped the market higher, and now that these dreams are lining up to become true, it’s getting ugly in some big corners of the stock market.
The S&P 500, after digesting the jobs report on Friday, fell 1.7% for the day and 4.2% for the four-day week, the biggest weekly drop since March 2023, to 5,408. But it’s still relatively well behaved, down only 4.6% from the peak in mid-July, compared to the nuts and bolts we’re going to look at in a moment (all stock data via YCharts):
The Nasdaq Composite dropped 2.6% for the day, to 16,691. It’s down 5.8% for the week and 10.5% from the peak on July 10.
If it drops another 4.2%, it’ll be back where it had been in November 2021, nearly three years ago, separated by a 36% plunge and a generational – meaning once in a generation – rally of 81% in 19 months.
In light of the drop on August 7, which is now just 500 points away, there’s a make-or-break quality to this curve.
Semiconductors got crushed. The VanEck Semiconductor ETF [SMH] plunged 4.1% on Friday and 11.7% in the four-day week, and is down 23.6% from the July 10 peak. There it is again, this make-or-break quality of the curve.
The Russell 2000, which covers the smaller 2,000 stock in the Russell 3000, fell 1.9% for the day. It’s down 5.7% for the week and 14.4% from the peak in November 2021, and back to where it had first been in January 2021.
These are 2,000 stocks and they’re not all that small, they’re just not the top 1,000, and in that part of the stock market, it’s a mess:
The Mag-7 stocks – Amazon, Alphabet, Microsoft, Apple, Nvidia, Tesla, and Meta – combined by market cap dropped 2.9% for the day and 6.1% for the week and are now down 14.9% from the peak on July 10.
Just these seven stocks combined have lost $2.54 trillion in market capitalization in the two months since the peak. We’re paying attention to the Mag 7 because they’re so huge – their combined market cap is still $14.5 trillion (down from $17 trillion on July 10) – and because they have such a big impact on the overall stock market wealth due to their magnitude, and because they had such a huge run.
Each gridline in the chart below marks $1 trillion. From the beginning of 2019 through the peak on July 10, the Mag 7’s market cap spiked by 386%, or by $14.5 trillion. The years 2020 and 2021, when the Fed printed nearly $5 trillion and threw it at the markets, was a fantastical time for stocks. But since then, the Fed has been doing QT, shedding $1.85 trillion. And that was rough in 2022 for stocks. Then AI mania came to the rescue in 2023 and through July 10, 2024. But that is now blowing over too.
And there it is again, this make-or-break quality, with the August 7 low point just a breath away. Rate cuts are such a doozie. And they haven’t even started yet.
For six of the Mag 7, the peak was on July 10. For Tesla, it was in November 2021.
Mag 7$ Share Price% Drop for the Week% Drop fr. PeakAmazon [AMZN]171.43-4.0%-14.2%Alphabet [GOOG]152.16-7.8%-21.0%Microsoft [MSFT]401.68-3.7%-13.8%Apple [AAPL]220.89-3.5%-5.2%Nvidia [NVDA]102.70-14.0%-23.9%Tesla [TSLA]210.89-1.5%-48.6%Meta {META]500.50-4.1%-6.4%
Three of the Mag 7 – Alphabet, Nvidia, and Tesla – have dropped by over 20% from their peaks; Tesla by 48.6% from its November 2021 peak and by 19.9% from July 10. So we’re going to look at those three standouts more closely, plus Amazon, which is back where it had first been four years ago.
Nvidia’s market cap has now dropped to a still gigantic $2.52 trillion, giving up $406 billion during the week and $800 billion since the July 10 peak.
This stock and the company’s revenues and earnings were powered by the fantastical AI mania that befell the world and which appears to be running low on juice.
Amazon has dropped 14.2% from the July 10 peak, which put it back where it had first been just about exactly four years ago, in September 2020. Note the plunge and then the 100%-plus surge in between. A lot of fun was had by all.
Alphabet, down 21% from the July peak, is now just a hair above where it had first been in November 2021:
Tesla is down 48.6% from its peak in November 2021, and is back where it had first been nearly four years ago, in December 2020. Obviously, those buy-and-hold investors who bought in 2019 or before – on the eve of Tesla becoming a big profitable global automaker – are still up a whole bunch, but they gave up about half of their erstwhile gains over the past three years:
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