Nasdaq 100 on verge of correction, eyes on balance sheets

The rotation, which began with the data released supporting expectations for interest rate cuts in the US and sent the Nasdaq 100 index down 8% in two weeks, has brought the technology-heavy index to the brink of a technical correction. During the rotation, investors increased options on the Invesco QQQ Trust Series 1 ETF, which tracks the Nasdaq 100, to protect themselves against further declines, and the premium on bearish put options rose to an eight-month high. The Cboe Volatility Index rose above 18 for the first time since April last week, while a similar measure of turbulence for the Nasdaq 100 reached its highest level since October, when the index last experienced a correction. Whether investors continue to move away from technology stocks that have driven the rally throughout the year and into small-cap stocks will depend on the balance sheets of critical technology companies to be released this week. Microsoft is due to report its financial results on Tuesday, Meta Platforms on Wednesday, and Amazon and Apple on Thursday. Last week’s Alphabet and Tesla earnings misses expectations, raising investors’ concerns about the rest of the earnings season. “These earnings are really important. If they miss expectations, I think the implication is that AI is not delivering the service that people expected,” said Michael O’Rourke, chief market strategist at Jonestrading.