The market is sending a clear message before today’s Fed meeting. Investors are cutting exposure to high-flying speculative stocks and rotating into classic economic bellwethers while they wait to see whether the central bank delivers a “hawkish cut.”
Some of the market’s most speculative movers are taking the hit. Bloom Energy $BE ( ▲ 10.32% ) , IREN $IREN ( ▲ 10.06% ) , Opendoor $OPEN ( ▲ 0.16% ) , Rigetti Computing $RGTI ( ▲ 3.33% ) , IonQ $IONQ ( ▲ 5.41% ) , and Oklo $OKLO ( ▲ 8.65% ) all dropped at least 2.5 percent in early trading. Traders appear to be unwinding the same small-cap and high-beta bets that surged when rate cuts resumed earlier this year.
Meanwhile, cyclicals are having a moment. Goldman Sachs’ basket that tracks cyclical stocks relative to defensives is on pace for its ninth straight day of gains, which would be the index’s longest winning streak since 2017. The SPDR S&P Regional Banking ETF $KRE ( ▼ 0.86% ) is also pushing higher as money flows into more economically sensitive plays.
Goldman’s high-beta momentum long basket is down about 1.5 percent this morning, while its high-beta momentum short basket is bouncing. The shift suggests traders are pulling risk from volatile long-short trades and bracing for the possibility that the Fed cuts rates but signals it is not eager to keep easing.
Speculative stocks have lived off the hope of continued rate relief. Today will decide whether that story continues or gets paused.