ASX suffers worst week since 2020, every sector down, Nuix, Whitehaven report

The S&P/ASX 200 suffered its worst week since 2020, finishing Friday 2.3% lower and losing 2.9% over the last five days.
 
On Friday, every single sector on the market was lower, in fact just 12 companies in the top 200 managed a positive return, Boral Ltd (ASX: BLD) being one of them, gaining 2.1%.
 
Whilst the threat of higher interest rates is being blamed for the selloff, it was the materials and energy sectors down 3.5 and 3% respectively that felt the brunt of the pain, with BHP (ASX: BHP) falling 4.8%, despite gaining approval of their UK delisting.
 
Similarly, uranium miner Paladin (ASX: PDN) took an 11% hit in the session.
 
Whitehaven Coal (ASX: WHC) also took a major hit, falling 6.1%, after declaring a 5% fall in production and spike in production costs will impact on profit.
 
The low light by far, however, was Nuix Ltd (ASX: NXL) which fell 22% after flagging a contraction in revenue to $82 million from $85 million in the year prior.
 
The defensive sectors ‘outperformed’ with staples and industrials falling just 1.1%.
 
It was a similar story across the week, with every sector in the red, and the perceived highly valued healthcare and technology sectors, down over 4% each selling off the most.  
 
US correction continues, Netflix tanks as expectations fall, bond yields flatten
 
The selling pressure continues unabated in the US as traders return to their desks with all three benchmarks falling on Friday.
 
The Nasdaq continues to underperform, falling 2.7%, with the Dow Jones and S&P500 down 1.3 and 1.9% respectively.
 
Every sector finished lower apart from the defensive consumer staples sector as managers flood back to the safe haven.
 
By far the biggest news was Netflix (NYSE: NFLX) which fell 22%, losing more in market capitalisation in a single session than many of the most popular technology companies are actually worth.
 
The selloff was due to concerns on the outlook for subscriber growth as the company experienced an anticipated slowdown.
 
Management reported 8.3 million new subscribers during the quarter but guided to just 2.5 million in the first quarter of 2022.
 
As has been flagged for many months, the challenge for technology companies was for earnings to keep up with the share price growth, a portion of which has been driven by passive investment flows.
 
Despite the selloff, the share price is still above the pandemic lows.
 
The losses across the week were significantly worse with Netflix dragging the Nasdaq down 7.6% in just four days, the S&P500 down 5.7 and the Dow Jones 4.6.
 
Watching the headlines, big test for new investors, Grantham at it again
 
It didn’t take long, but semi-retired octogenarian Jeremy Grantham was quick to stake his claim that global sharemarkets are in a ‘super bubble’ and ready for massive selloff at any time.
 
Any reader knows that Grantham has seemingly made a similar call in every other year, and whilst he may well be right, most people aren’t investing solely in the market, and would likely have been in cash for years if they followed his views.
 
Interestingly, some 40% of Nasdaq’s constituents are now trading 50% down from their all-time highs, suggesting the selloff is already underway.
 
Sticking with headlines, investors best be wary of the financial press as volatility picks up in markets, albeit hitting smaller, lower-quality companies the hardest, with superlatives like ‘savaged’, ‘smashed’ and ‘obliterated’ used to describe a 3% fall in the market.
 
Finally, this selloff may well be the most important test for those first-time investors who joined the market in 2020.
 
In many cases, they have seen little in the way of volatility and every sell-off has been rewarded with a swift recovery.
 
If it continues, we may well see another wave of retail selling, not unlike the trend that has seen Bitcoin fall 40% from its high.

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.