Another tough outing for the market, which began lower on continued worries of slower iPhone sales at Apple (AAPL), after reports of production cuts to all three of its new versions.

Tech is the biggest loser of the session, but other names are down big in other sectors, included Visa (V), PayPal (PYPL) and Microsoft (MSFT).   Communication services are down 2.5%, weighed down by Facebook (FB) and Netflix (NFLX), which represent 20% of the sector.  

Consumer discretionary is the third biggest loser on the session, with Amazon (AMZN) being one the biggest losers, representing 20% of the entire sector.  I’m impressed with how many of these names are holding up, some putting in strong sessions to the upside.

Investors are grappling with the meaning of the market’s slide.

• Is this an indictment of the U.S. economy and American consumer?
• Does it speak to global weakness gobbling up the United States?
• Is it a sign the Fed will push the economy into recession?
• Where these names priced for perfection and this is simply an adjustment?

Interestingly, most homebuilder stocks are trading higher, despite the disastrous release on homebuilder sentiment that hit the broad market hard.

The market was lower when the homebuilder sentiment number was released, coming in well below consensus and following one of the worse monthly declines in the history of the report.   That’s when the bottom seemed to fall out and all hopes of an intra-day rally vanished.

NAHB Sentiment Reading

Down eight percentage points to reading of 60.

The last time the sentiment dropped this fast was February 2014 when it fell 9%, before that, after 9-11 when it declined 10%.  I always focus on traffic of prospective buyers as a proxy for the entire economy.  Its contracted to its lowest level since July 2016.

Housing has been the Achilles heel of the economy all year long, from exogenous problems like higher lumber prices, limited supply, lack of workers, and more recently, higher mortgage rates.

In addition, there is also the social impact from millennials reluctance to become homeowners.  (Actually, millennials seem to have an aversion to any kind of asset ownership from homes, to cars, to even wardrobes, and that is having a deleterious impact on the economy.)

I think there was a 30% chance of buyers emerging at some point today, but the huge miss on homebuilder sentiment sealed the deal.  Would-be buyers moved to the sidelines, so now the question is when do the sellers run out of steam?

As for the economy, we are in very good shape but cannot withstand an onslaught of Fed rate hikes.  The market is adjusting and seeing price discovery, and in my mind, has already overshot, but that doesn’t mean it can’t move lower.

It does mean investors have to be careful not to take hits based on emotions more than fundamentals.

Let’s not force the issue this afternoon.