That was nuts. Is this the crash?

Ah, here we go again. Equities are collapsing, interest rates are rising, and suddenly, markets feel pretty chaotic for the first time, since, well, February's Vix-maggeddon.

Tech, in particular, has been suffering — check out the performance of the FANGs (Facebook, Amazon, Netflix, Google) this week:

Ooof. Although, to be fair, Netflix and Amazon have still had pretty good years. Less said about Facebook the better though:

Other loved tech stocks, such as rage-as-a-service platform Twitter and chip creator Nvidia have not fared much better:

Here's the Deutsche Bank macro wonk take on the US equity market action, fresh in our inboxes this AM:

The S&P 500 (-3.28%) and DOW (-3.15%) both had their worst days since the February market correction and the Nasdaq (-4.08%) shed the most since June 2016. The S&P 500 has now traded lower for 5 consecutive sessions, shedding -4.77% over that period, its longest such stretch since March. Every S&P 500 sub-sector traded lower amid generalised risk-off sentiment, but the FANGs (-5.60%) continued to underperform, saw their worst day since March and are now down -17.86% from their June peak.

Over the pacific from Palo Alto, and the Chinese tech giants haven't fared much better. Tencent, in particular:

Corrections are part and parcel of equity markets, but it is worth noting that this seems to have been prompted by a meaningful rise in US interest rates — the 10 year Treasury yield hit a seven-year high of 3.25 per cent this week. This has two effects on equity prices (at least, theoretically).

First, dividend yields, and thus dividend stocks, look less attractive versus the risk-free cash flows from the US Treasury. Although as prices fall, dividend yields rise, so we may see a floor soon if this is a factor.

Second, to state the obvious, a rising discount rate reduces the value of future cash flows. For growth companies such as Netflix, where the projected cash returns to investors are often five to ten years away, a small change in rates can materially reduce the present value of these returns.

It would be a touch hyperbolic to say this is the beginning of a larger downward move in US tech — we've had plenty of false starts before — but after a pretty good run, perhaps it is time for a reality check.

The technicals certainly suggest so: the extremely bearish Vomiting Camel Formation has struck the S&P 500, according to chart master Katie Martin:

Look out below.

Related Links:
That was nuts. Is this the crash? — FT Alphaville
That was nuts. Is this the crash? — FT Alphaville
That was nuts. Is this the crash? — FT Alphaville
That was nuts. Is this the crash? — FT Alphaville