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Buy or die? Bloodbath among S&P’s top performers

Buy or die; Bloodbath among S&P's top performers

It’s no secret that early April brought a sudden and stark halt to the 2024 stock market rally. Indeed, as seen in the performance of the S&P 500, one of the most important benchmark indices in the U.S. – the breaking point came very late in March and early in April when it collapsed from above 5,254 points to below 5,150 in just a few days.

The situation, however, remains more precarious than indicative of an imminent correction as the index recovered above 5,200 in the days since April 4.

Nonetheless, the slowdown remains evident with Tuesday, April 9, proving particularly bloody as the top 13 S&P 500 stocks of 2024 – including the likes of Nvidia (NASDAQ: NVDA), Super Micro Computer (NASDAQ: SMCI), and Meta (NASDAQ: META) – found themselves in the red.

Top S&P 500 stocks performance on April 9. Source: @michaelsantoli

It is notable, however, both that the exact reason for the decline is yet to emerge – with peak fright, worries about the Wednesday CPI print and the broader economy, and profit-taking after massive Q1 gains being the top contenders – and that the latest drops came during relatively low-volume trading sessions.

The bull case

In the context of the latest slowdown, the bull case would be that the decline of some of the top-performing blue-chip stocks presents a value-buying opportunity for investors who have, so far, failed to get in.

Such a view is particularly strong for shares of firms like Nvidia as analysts have both expressed their confidence there is plenty of room left to grow for the semiconductor giant, and are generally bullish on one of its main performance drivers – the artificial intelligence (AI) boom.

Indeed, major banks and other institutions have generally so far been optimistic about the stock market’s prospects in 2024, showing particular enthusiasm for large-cap companies, big tech, and the AI sector. 

Their forecasts have also estimated the second half of the year will be significantly stronger than the first lending credence to the notion that the April slowdown constitutes a value buying opportunity and not a canary drawing its last breath.

Some, like ‘The Big Short’ investor Steve Eisman have also stated that, despite all the anxiety, there is little reason to worry – oddly enough provided the FED does not lower interest rates – and posited that the economy is doing fine.

The bear case

The bear case, on the other hand, has been gaining increasing momentum in recent weeks as voices warning of a looming crisis have started growing in volume and frequency.

People from backgrounds and positions as varied as Jamie Dimon, the CEO of JPMorgan (NYSE: JPM), and Rober Kiyosaki, the author of ‘Rich Dad Poor Dad,’ have recently been forecasting a coming recession – possibly as early as 2024 and possibly as big the one in 1929 – indicating the canary may not be dying but already dead.

Further dread can be extracted from the fact that Goldman Sachs (NYSE: GS) recently reported that hedge funds are offloading stocks at rates not seen in three months while increasingly adding short positions.

Finally, shortly after delivering the highest S&P 500 target for 2024 at 5,535 points, Wells Fargo’s (NYSE: WFC) Chris Harvey reportedly stated that he is not, in fact, feeling bullish.

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