Concentrated neurosis dominates the market and news flow this week, as well as into the weekend. We’re seeing some cracks in mega-cap liquidity as a short-squeeze took hedge funds into a blow-off (or idiotic chasing higher for the big-caps); while the sensitive small-caps rebounded and settled-back now.I think the rotation towards value evolves; but we have lots of infighting along with consumer reticence; and even fears of China provoking conflict, as they take advantage of America’s focus on issues other than ‘global security’. All of it is used as a concern to explain the retreat of mega stocks; but decline there predated the most recent concern about Taiwan’s security.Primarily Friday, expected to be defensive ahead of a political weekend prior to today’s news, was mostly reaction to the global computer collapse, which is a shame and I have to go back years ago to recall comments about ‘why’ so many businesses used Windows-based systems; given they were clearly less secure than Mac-based systems, which also require less maintenance.My view was that having machines requiring so much ‘care’ resulted in more demand for IT jobs; so there’s that. This was not a ‘hacking’ situation; but was more like inducing malware via software intended to clean those computers.Market X-ray: Tech outage hits globally; beyond airlines and hospitals that are the obvious victims of their own security software update. However the market woes are beyond that, and relate to domestic & global politics; earnings jitters, or simply the continuation of appropriate corrections mostly in the mega-caps.Is there ‘crash’ risk? Well sure, we’re already having that in some mega-caps; it might persist or rotate (roller-coaster) in August. Variables or overextended as we argued so many where. Plus the ‘domestic-centric’ America first policy may be great for the Nation, but it presses ‘some’ big multinational prospects. I ponder whether American automakers will really prospect in years ahead. In most cases yes; but now there’s more confusion about power-train selection.So, CrowdStrike (CRWD), which is the instigator of un-vetted uploads that turned out to hobble computers almost to the extent feared by Y2K bugs; remember? It’s not that; and they are doing ‘everything they can’ to restore global systems.Part of what’s unfolding is also ‘perception’. That means contemplating how at least some big-cap stocks will respond to ‘Americanizing’ the supply chains of the world, to the extent that’s feasible. For decades (well before Trump) I had argued for less globalization.I contended some globalization was favorable; while large globalization was destructive of American industry and jobs. That predates my ‘keynote’ address at the American Footwear Association back in Boca, and believe it or not that was 1976. Nobody fought for U.S. jobs.Bottom line: this computer outage is a very big deal for earnings impacts too; especially airlines and such. For instance, when a flight cancels, you should be automatically rebooked on another service by your airline. Depending on the severity of this outage for your airline, which generally is huge, that new flight is likely many hours, if not days, after original departure times. So many flights were cancelled, with forward bookings heavy; that it will take most of next week (if not longer) to catch-up to get traffic flow anywhere near normal.S&P finished near the day’s low; continuation downside pattern persists; and fluid dynamics suggest more to come, at least for the moment. The computer chaos is more significant than whether Biden decides to withdraw candidacy, or not. However that matters too; with the overall mood contributing instability.More By This Author:Market Briefing For Wednesday July 17
Market Briefing For Tuesday July 16
Market Briefing For Monday July 15