On Thursday, Oct. 29, Alphabet (GOOGL) lost $499.8 billion of stock market value in one session. Google's parent fell 12.64%, its worst day on record. Only one bigger one-day loss for a company is on the books. Yet most stocks went up that day. On Friday, the selloff found the chip makers.
The week started quietly. On Wednesday, Oct. 28, the Fed held rates steady, as expected. Chairman Kevin Warsh's comments made investors think fast rate hikes were less likely. The S&P 500 rose 0.28% to 7,743.98. That left it less than 1% under its Oct. 6 record of 7,818.93.
Alphabet's report after that close broke the calm. Its services unit, home of search ads, brought in $96.3 billion. Wall Street wanted $98.5 billion. The Nasdaq fell 1.38% on Thursday, and the S&P 500 slipped 0.30% to 7,720.39. Under the surface, most stocks had a good day. Rising stocks on the New York Stock Exchange beat falling ones 1,914 to 782. The equal-weight S&P 500 fund (RSP) gives each company the same slice. It rose 1.20%. The regular S&P 500 fund (SPY), weighted by company size, fell 0.38%. Small companies in the Russell 2000 rose 1.01%. Eli Lilly (LLY) jumped 6.6%.
Friday, the chips
After Thursday's close, Intel (INTC) gave a weak outlook and fell 20.60% in late trading. Amazon (AMZN) slid 5.30% on its own report. Friday's session isn't in either paper, so these numbers are ours. By our own pull at midday Friday, the iShares chip fund (SOXX) was down 9.59%. Intel was down 30.66%. The S&P 500 was down 2.15%, and the Nasdaq was down 3.35%. The VIX, Wall Street's fear gauge, jumped to 21.89 from 17.20. Still, the equal-weight fund was down only 0.99%. The energy fund (XLE) was up 1.49%, with Exxon (XOM) and Chevron (CVX) due to report that morning.
Our read
This is an Investments/Risk story, IN04. A selloff that lives in one corner of the market can still drag the whole index. An S&P 500 fund puts the most money in the biggest companies, and many of them are AI and chip names. That's why the index fell Thursday while most stocks rose. By our own pull at midday Friday, the S&P 500 sat 3.39% under its record. Our October Letter drew a line at a 7% drop from that record. The index would need to fall about another 3.7% to reach it. In our model books, nothing was bought or trimmed since the first third of the North Star reserve went in on Saturday, Oct. 17. The other two thirds still wait for a lower written level and the week of Nov. 3. Alphabet is held at weight in 28 books and Micron (MU) in 23. Nothing was added.
Here's the check for your own money. Open your 401(k) or IRA app this week and find your biggest stock fund. Look up its top ten holdings and add up how much sits in tech and chip companies. Then find the money you'll need in the next two or three years. That money usually belongs in cash or Treasury bills, outside the stock fund. If it's already there, a Friday like this one asks nothing of you. The best time to find the umbrella is while the sky is only gray.