All of a sudden, the fundamentals aren't looking as strong.
First it was Apple's $5 billion revenue miss, hints of which lopped 30 per cent from its stock over three months. Now it's a closely watched gauge of US factory activity, which dropped to a two-year low and missed every estimate in a Bloomberg survey.
What's going on? Over and over in the fourth quarter, as the S&P 500 plunged 19.8 per cent to the brink of a bear market, investors heard the same refrain: don't panic, the economy, and corporate earnings, look strong.
In the last 24 hours, confidence in those assurances has taken a hit. The Dow Jones Industrial Average fell more than 600 points, or 2.6 per cent, Thursday morning, while losses in the Nasdaq 100 spiralled toward 3 per cent.
"The market is the wisdom of all investors - it was discounting this type of news-flow with the sharp and violent sell-off we got in December," Alec Young, managing director of global markets research at FTSE Russell, said in a phone interview. "When it makes a big move, up or down, it's telling you positive or negative things about future developments. The extreme move down was telling you we'd get this type of news-flow."
All the bad news has put an abrupt halt to what had been the equity market's best five-day run since 2011, a surge in the S&P 500 that reached 7.2 per cent at yesterday's high point. It's reprising anxiety that left stocks within points of a bear market on Christmas Eve.
While plenty of real-time irritants existed to explain the fourth-quarter tumble -- tariff wars, the Federal Reserve, stretched valuations - many bulls expressed bewilderment about the velocity of the plunge given estimates for growth. The US economy is forecast to expand by 2.6 per cent in 2019 and corporate earnings, while off this year's torrid pace, are expected by analysts to rise 8.3 per cent.
"The market is pricing in recession no matter what - the market has priced it in," said Jeff Carbone, managing partner at Cornerstone Wealth. "Now to what extent and when? That history hasn't been written yet."
Anything that suggests cracks in the earnings and macro foundation would go down poorly on Wall Street. That's what was happening Thursday, as Apple's outlook clouded profit forecasts at everything from semiconductor suppliers to electronics retailers, and the Institute for Supply Management index miss spurred speculation the economy isn't doing as well as hoped.
For investors trying to read the tea leaves, two risks exist. One, that the market saw something the professional prognosticators didn't. And two, that the losses piling up in financial markets become a kind of self-fulfilling prophecy, denting sentiment and impairing consumer and business confidence.
"It's the psychology of the market, which now is that growth is slowing and it almost feeds on itself," Laurence Benedict, founder of Opportunistic Trader, said in a phone interview. "Businesses don't want to spend because we potentially are going into a recession. Overall, the perception leads into reality. "