Market on a Knife’s Edge: Tech Sells Off, Defensives Rally

Fresh news and strategies for traders. SPY Trader episode #1460. The S&P 500 hits a threeweek low as tech stocks plunge, led by Oracle financing fears, triggering a violent sector rotation out of growth and into value and defense. We break down the Nasdaq's rout, why Eli Lilly and Energy stocks rallied, and how investors should hedge risk and position portfolios defensively ahead of today’s crucial CPI report. Plus, tactical advice for buying the dip in AI infrastructure plays.

Episode Transcript

(00:00):
Welcome back to Spy Trader .
I'm Mike Money , and it is 5 am on Thursday , December 18th , 2025 , Pacific .
We are waking up to a futures market that is attempting to stabilize after four straight sessions of losses .
The big story overnight remains that violent sector rotation we saw yesterday , driven by fear , profittaking , and the dreaded macroeconomic headwinds .

(00:25):
Let's jump straight into the numbers from Wednesday , December 17th .
It was a brutal session for growth stocks .
The Nasdaq Composite led the rout , plunging 1.81% .
The broader S&P 500 dropped 1.16% , hitting a threeweek low .
Noticeably , the Dow Jones Industrial Average outperformed the others , losing only 0.47% .

(00:51):
This is the textbook signal of money rotating out of highflying tech and into value names .
What triggered this tech panic ?
Well , news broke that a key backer had reportedly backed away from financing a major 10 billion data center project for Oracle , sending its stock down 5.4% .

(01:12):
That single event triggered broad selling across AIlinked infrastructure plays .

We saw bellwethers like Nvidia drop 3.8% , AMD plunge 5.3% , and Broadcom fall 4.5%.However , there was a positive countersignal (01:18):
Micron Technology reported betterthanexpected earnings and provided a bullish forecast , driven by continued AI demand , causing its stock to jump in afterhours trading .

(01:41):
While tech was burning , defensive and value sectors shone .
Energy stocks outperformed as President Trump ordered a complete blockade of sanctioned oil tankers linked to Venezuela , injecting geopolitical risk into oil prices .
In Healthcare , Eli Lilly continues its impressive run , already up nearly 30% for 2025 , after announcing plans to build a new 6 billion facility to boost production of its immensely popular weightloss and diabetes drugs .

(02:14):
And that brings us to the analysis .
The market is trading under a heavy cloud of economic uncertainty following the resolution of the 43day government shutdown .
We have a latecycle growth environment where valuations are stretched , and all eyes are on the November Consumer Price Index report due today .

(02:34):
Inflation is high , exacerbated by tariffs , causing businesses to raise prices rapidly .
The Fed has already cut rates three times in 2025 , but with Q4 GDP tracking lower , closer to 1% , and unemployment at a fouryear high of 4.6% , the market is highly sensitive to any data that suggests the Fed might slow its dovish pace .

The takeaway is this (03:00):
this is an environment for defensive and diversified strategies .
First , hedge that tech concentration risk .
If you are overly exposed to the concentrated Invesco QQQ Trust , consider shifting some capital to the broader Vanguard S&P 500 ETF , or VOO , which provides a more balanced allocation .

(03:23):
Second , overweight defensive sectors .
The Health Care Select Sector SPDR Fund , XLV , remains robust , fueled by companies like Eli Lilly .
For pure defense against the slowing economy , Consumer Staples are gaining confidence , look at Procter & Gamble .
Third , maintain fixed income for ballast .

(03:44):
With all this equity volatility , keep your core holdings in something like the Vanguard Total Bond Market ETF , BND , to reduce overall portfolio swings .
Finally , don't ignore the dips .
The AI selloff was partly idiosyncratic , and the bullish forecast from Micron confirms the longterm supercycle is intact .

(04:07):
Investors with a long horizon can use major down days as buying opportunities to dollarcost average into a name like Nvidia , or the Technology Select Sector SPDR Fund , XLK.The market is on a knife's edge awaiting the CPI data .
Stay nimble , stay focused , and we'll catch you on the next episode of Spy Trader .