Amazon.com Inc (NASDAQ:AMZN) shares rose 12% in one of the biggest one-day gains in stock market history today, fresh off the back of Facebook owner Meta Platforms Inc (NASDAQ:FB) recording the biggest ever single-day fall.
What’s more, fellow big tech outfit Snap Inc (NYSE:SNAP) rocketed 52% higher.
Other trillion-dollar-plus behemoths are seeing big swings, with shares in US$2.8trn Apple Inc (NASDAQ:AAPL) last week enjoying their biggest one-day percentage jump in a year and a half of 7%, and Google owner Alphabet Inc (NASDAQ:GOOG) this week jumping over 10% intraday.
Partly, today’s rises for Amazon and Snap are a reaction to Meta-inspired falls yesterday, when the Facebook owner crashed 26% and wiped out US$220bn of its value, sending Snap plunging 24%, Amazon near 8%, Netflix losing more than 5.5%, Google more than 3.5% and Apple 1.6%.
But the clanging performances of what was formerly the called FAANG group of tech titans have been fairly divergent, with Apple, Alphabet and Amazon (mostly) impressing, but Meta and Netflix disappointing.
“Markets are trying to make sense of these wildly divergent earnings from big tech,” said Neil Wilson at Markets.com.
“If you’re seeing these kind of gigantic moves in the largest mega caps it’s not a functioning market.”
And, as says Michael Hewson at CMC Markets, “These are eye-watering, stomach churning moves normally associated with penny stocks, and yet they are happening in companies with billion-dollar market caps.”
So, the wild swings are the market manifestation of the end of the era of cheap central bank money.
With the pricking of the central bank bubble, says Wilson, the stock market reaction “betrays the total dislocation created central banks which they’re now trying to unwind”.
While battling with these new forces, investors, economists and other market actors are trying to unpick the significant dislocation in the economy.
“Earnings are all over the place as well which is quite unusual but even allowing for that the moves are outsized… the fact mega cap stocks are behaving in this way is important – it’s not indicative of a bull market," says Wilson.
As he succinctly sums it up: “It’s nuts.”
The wild swings are also a function of the way markets are heavily managed by machines, says Wilson, which “are trading the headlines which are then unpicked later on by humans [...] There is no way FB should be down 26% on that report. There is no way Amazon should be up 15% on that."
With the rising-tide-lift-all-boats era ending, we are “back to a different type of market”, he adds, following the central banks interest rates regime completing a 180-degree turn.
“So you have to focus on individual business models not just sweep everything into one big tech basket and see it go up.”
Hewson describes it as a “tug of war” going on for investors as they try and work out which are the best companies to be in as growth seems to be slowing.
This feeds through to companies being severely punished if they miss expectations or downgrade their outlook, and the moves are bigger as investors are trying to price a market that has seen gigantic gains over the past few years due to central bank stimulus.
Peter Zangari, head of research at MSCI, said it was part of a trend of continued investor rotation from low-quality to high-quality growth that had started in earnest in the final quarter of last year and was accelerating into this year dramatically.
“The largest tech stocks are not a homogenous bunch," Zangari said, “firms like Apple are considered high quality based on profit margins and steady earnings. Other firms like Tesla are considered lower quality based on the same measure."
However, while the tech giants get the headlines, the bulk of the rotation has been elsewhere, with mid- and small-cap growth stocks, the 'lower quality', that have been falling most sharply.
The odds are that the process has not ended yet.
“Fasten your seatbelts,” says Hewson, “its likely to be a bumpy ride from here on in.”