Weekend Wrap: Tech tantrum and REA's selloff

Hi there! This article is an excerpt from our weekend newsletter - which talks all things markets plus some interesting data insights and memes Join 100,000+ readers receiving the Newsletter every Sunday morning - Register here. It's free. Tech tantrum and REA's selloffHi there!What a week, with commodities tumbling, crypto crashing and large cap tech sinking. It felt like someone is rotating from asset class to asset class, and blowing them all up with a barrage of selling pressure.At times like this, it gets pretty dark out there. The RBA is now expected to hike again in May, US layoffs surged to the highest since 2009, US-Iran tensions continue to boil and Bitcoin has fallen off a cliff. Commodities are also ripping one day, and dipping the next (but mostly dipping this week).On the plus side, the ASX is set to deliver its first year of earnings growth, after posting flat-to-negative growth over FY23-25. Consensus expects EPS growth of 8-9% in FY26 and FY27, largely driven by higher resource-related earnings. Perhaps this is just a healthy pullback?Let's dive in.Investor sentiment surveyOver the next three months, do you expect the Australian stock market to be:BullishNeutralBearishThe tech selloffTech stocks are in deep pain – with the S&P/ASX 200 Tech Index down 20% year-to-date and down 40% since late September.There’s a lot of chatter about this sector, so here are some tidbits I found interesting:On the weekly chart, the RSI of the Tech Index 18, far below Liberation Day (37), COVID (28) and the height of the GFC (26). This is only comparable to the Dot-com bubble (11) – which goes to show just how much more oversold it can getThe bottoming process from such conditions is never a pretty one – you get weeks of sluggish price action around those eventual lowsMost tech names are still fairly expensive – on a trailing price-to-earnings basis, you’ve got Life360 (137x), Xero (53x), Technology One (52x) and Wisetech (51x)JPMorgan analyst Toby Ogg said we are now “in an environment where the sector isn’t just guilty until proven innocent but is now being sentenced before trial … better-than-expected results are no longer enough to convince the market,” Ogg wrote. That’s unless “they can demonstrate irrefutably that AI is a sustainable tailwind to growth rather than a longer-term headwind.”The Jefferies trading desk also noted "I ask clients, ‘what’s your hold-your-nose level?’ and even with all the capitulation, I haven’t heard any conviction on where that is. People are just selling everything and don’t care about the price."REA showcases extreme sellingREA reported its 1H26 result on Friday, which slightly missed market expectations, along with a weaker-than-expected full-year guidance for listings growth.Revenue up 5% to $916m vs $927.7m ests (1% miss)Net profit from core operations up 9% to $341m vs $344.1m ests (1% miss)Interim dividend up 13% to $1.24 per share vs. Morgans ests of $1.29 (4% miss)FY26 national residential Buy listing volumes to fall 1-3% year-on-year compared to market expectations of flat growthThe price action that followed was something you’d never expect to see from a large cap. The below order book shows:Opened 17.75% lower to $150.01At the open, there was a total of ~$35,000 of buy orders spanning $150-100 Theoretically, if you sold ~$35,000 on market, you could very briefly drive the share price 44% lower to $100On the buy side, there was ~$330,000 for $150-152, another ~$20,000 between $155-158 and the next order from that was $165I think this was a massive “WTF” moment as no one expected such an open. The lack of liquidity saw a massive knee-jerk move, with the stock rallying ~15% off the low to $172.50 in just four minutes (imagine buying the dip!).Given the heightened volatility and downbeat sentiment towards certain sectors, this is certainly a reporting season that warrants caution.Glen-Tinto fails (again)Rio Tinto failed its fourth attempt to merge with Glencore. Now Chief Executive Simon Trott has another thing in common with his predecessors Tom Albanese, Sam Walsh and Jakob Stausholm – a failed merger attempt with Glencore.The main catalyst was price, as Glencore wanted approximately 40% of the combined entity, while current market caps imply a 32-68 split.This leaves Rio in a tricky spot since:Rio wants more copper, but cannot organically grow it fast enough to move the needle at the group level. The company remains over-exposed to iron oreRio probably won’t make a big cash takeover, given the PTSD from its 2007 Alcan purchase (bought a US$38bn aluminium producer right before the GFC)China’s Aluminium Corp holds 14.5% of Rio’s LSE-listed shares, and the shareholding agreement limits buybacksLast laughsAnthropic have just buried OpenAI and ChatGPT with this ad.It's a short 60 second skit – and there's no coming back from that.