Here's What Hit the Magnificent 7 Stocks, and Why It May Continue.

Amidst the focus on Tuesday's CPI data and Wednesday's Fed meeting, an intriguing development has emerged in a key sector of the stock market. Monday witnessed a rare occurrence as the Nasdaq 100 achieved a positive close despite all seven of its major constituents—Apple, Amazon, Tesla, Nvidia, Microsoft, Meta, and Alphabet—ending the day in negative territory. While this might be dismissed as a one-time anomaly, The Macro Tourist’s Kevin Muir suggests that the selling pressure on these heavyweight stocks may be just beginning.

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Muir points to the Nasdaq's recent announcement of final changes for its Nasdaq 100 rebalance, scheduled to take effect with Friday's option expiration. The Nasdaq committee had previously flagged the heavy concentration of the Magnificent 7 group and its methods for addressing this issue. A chart from the Nasdaq illustrated this concentration and prompted a special rebalancing effort this summer.

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Barclays, as highlighted by Muir, expressed surprise at the rebalance outcomes, noting significant downweights for these major stocks, resulting in an aggregate supply reduction of approximately -$13 billion. This contradicted expectations based on index methodology, which had anticipated meaningful upweights for these stocks.

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Muir cites Barclays' breakdown of the substantial stock selling required for rebalancing: Apple at $4.7 billion, Microsoft at $4.1 billion, Amazon at $2.26 billion, Alphabet A shares at $1.22 billion, Alphabet C shares at $1.29 billion, Nvidia at $1.76 billion, and Meta at $135 million. While Tesla necessitated buying of $2.9 billion, the actual figure expected was $5.67 billion.

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JPMorgan's quant team also acknowledged the rebalancing, providing figures that aligned closely with Barclays' assessment. The funds raised from selling these stocks must now be redirected into buying the remaining 93 Nasdaq 100 names, leading to the observed market movements on Monday.

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Muir commends the Nasdaq committee for reducing the concentration of major names and suggests that this selling pressure might continue, with other committees potentially following suit in the new year. He speculates that this could mark the beginning of a return to normal performance for these stocks.

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Post-CPI, stocks are trending lower, with steady Treasury yields and the dollar holding losses. Gold hovers just above $2,001/oz, while oil prices have declined over 2%.

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In other news, November inflation exceeded expectations, with headline CPI up 0.1%, and core prices (excluding food and energy) rising by 0.3%. Annually, core CPI held steady at 4%, in line with expectations.

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AstraZeneca has announced the acquisition of clinical-stage biopharmaceutical company Icosavax for up to $1.1 billion, leading to a 45% surge in Icosavax shares. Hasbro shares are down after the company announced 900 job cuts due to weak toy sales, and Oracle is facing a 9% decline following disappointing revenue results.

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Ford is reportedly set to halve production of its electric F-50 Lightning pickup trucks next year.