Original title: Sudden thunderstorm!

The 1.2 trillion giant plummeted, what happened?

After being hit by technology stocks, the 80 billion star fund was liquidated!

Wall Street bigwigs warn of a terrible summer

  Another US stock technology giant "exploded".

  The latest financial report disclosed by the global network equipment giant, Cisco, failed to satisfy the market.

According to the financial report, in the fiscal quarter ended April 30, Cisco’s revenue was US$12.8 billion, with almost zero year-on-year growth, which was seriously lower than market expectations, and the company’s outlook for future performance was also very pessimistic.

After the US stock market opened on Thursday, Cisco suffered a market sell-off. As of 23:40 on the evening of May 19, Beijing time, the decline expanded to 13.67%, and the total market value fell to 174.2 billion US dollars (about 1,169.5 billion yuan), nearly 2 trading days. The market value has evaporated by more than 36.7 billion US dollars (about 246.4 billion yuan).

  Faced with this round of frenzied selling of U.S. stocks, Wall Street tycoons who are long in technology stocks suffered huge losses.

On May 18, local time, the Wall Street tens of billions star fund Melvin Capital announced its liquidation.

At the beginning of this year, the fund managed about $12.5 billion in assets (about 84.4 billion yuan).

  Wall Street investment tycoons seem to be increasingly pessimistic about the U.S. stock market outlook.

In the latest interview, Scott Minerd, chief investment officer of asset management giant Guggenheim, said that investors in U.S. stocks are expected to experience "a terrible summer and autumn", with the S&P 500 index from its highest point on January 3, 2022. plunged 45% (down 18% now).

In addition, legendary investor Jeremy Grantham, who successfully predicted two market crashes, also predicted that the S&P 500 will continue to decline, or 40% from its peak.

Cisco's performance suddenly "exploded"

  Since 2022, the U.S. stock market has been particularly severe in punishing "explosive performance".

  This time the financial report "exploded" is the global network equipment giant - Cisco.

After the market close on Wednesday, US time, Cisco disclosed its latest quarterly financial report. As of April 30, Cisco’s revenue was $12.8 billion, a year-on-year increase of almost zero, significantly lower than analysts’ expectations of $13.34 billion; net profit was $3 billion, A year-on-year increase of 6%.

  Specifically, in the third fiscal quarter, Cisco's product revenue was $9.45 billion, lower than analysts' expectations of $9.79 billion; the security and agile network divisions including data center network switches recorded revenue of $5.87 billion, lower than the market. Expected $6.09 billion; future Internet segment recorded $1.32 billion, lower than market expectations of $1.44 billion.

  On the evening of May 19, Beijing time, after the opening of the US stock market, Cisco suffered a fierce market sell-off, and the stock price opened sharply lower by 10%. 100 million), the market value has evaporated by more than 36.7 billion US dollars (about 246.4 billion yuan) in the past two trading days.

  For this lower-than-expected transcript, Cisco management attributed the reasons to: Russian-Ukrainian conflict, epidemic, inflation, and supply chain crisis.

  Cisco Chief Executive Chuck Robbins said on an earnings call that the Russia-Ukraine conflict reduced Cisco's revenue by about $200 million, while increasing cost of sales by $5 million and operating expenses by $62 million.

  In addition, Robbins said that the recent new crown epidemic in some regions has exacerbated the shortage of upstream components and also affected the company's production capacity.

  What worries the market more is Cisco's pessimistic outlook for the company's future performance.

Cisco expects fourth-quarter fiscal 2022 revenue to decline by 1% to 5.5%, and adjusted earnings per share of 76 cents to 84 cents; full-year fiscal 2022 revenue growth is expected to be 2% to 3%, Adjusted earnings per share came in at $3.29 to $3.37, below the previous forecast of 5.5% to 6.5%.

  Wall Street agencies had expected Cisco to generate $13.87 billion in revenue in the fourth quarter of fiscal 2022, up about 6% year-on-year; Cisco's full-year earnings per share were expected to reach $3.44.

  In contrast, the performance guidance given by Cisco is obviously far below the expectations of Wall Street institutions, which also intensifies the determination of these capital predators to sell their funds.

  Cisco was founded in 1984 by a couple of teachers at Stanford University.

At present, Cisco has become the world's leading provider of network interconnection solutions, especially in the enterprise market.

According to data from Statista, Cisco occupies the largest share of the global enterprise network solutions market, almost half of it.

  As a U.S. stock technology giant, Cisco’s pessimistic expectations for future performance have further aggravated market funds’ concerns about U.S. technology giants, causing U.S. technology stocks to once again encounter a wave of killing valuations.

80 billion star fund liquidation

  In this round of frenzied selling of U.S. stocks, Wall Street institutions that are long in technology stocks have suffered huge losses.

Following the "Waterloo" of Tiger Global Fund and "Queen of Technology" Catherine Wood, another tens of billions of dollars in star funds can't carry it.

  On May 18, local time, hedge fund Melvin Capital (Melvin Capital) said that during the turmoil in the U.S. stock market this year, the fund’s losses are increasing, and it will gradually unwind the fund and return cash to investors.

  This means that this former Wall Street star fund will be completely liquidated.

Melvin Capital founder Gabe Plotkin announced the decision in a letter to investors Wednesday.

Gabe Plotkin said, "The past 17 months have been an incredibly difficult time. I have tried everything I can and still cannot achieve the expected return on investment. I now realize that I need to stay away from managing external capital."

  Plotkin also said in the letter that he has worked tirelessly for 20 years, striving to do his best, and is grateful for the trust of investors.

  Under the arrangement, Melvin Capital has substantially reduced the fund's risk exposure.

As of June 1, no management fees will be charged, and at least 50% of investor funds will be redeemed by May 31 and the rest by June 30.

  As of April this year, Melvin Capital managed about $7.8 billion in assets (about 52.7 billion yuan).

At the beginning of this year, the fund managed about $12.5 billion in assets (about 84.4 billion yuan).

  This round of slump in technology stocks is undoubtedly the last straw that "crushed" Melvin Capital.

  According to the 13F document, in the first quarter of this year, Melvin Capital significantly increased its holdings of Amazon and Microsoft.

In this round of selling since April, Amazon and Microsoft have also suffered sharp declines, falling by 34.3% and 17.4% respectively.

  In addition, as of the end of March, Melvin Capital's largest position was mainly in the beneficiary stocks of the reopening of the economy, including Live Nation, Hilton Hotels, Expedia, and the cumulative declines of these three stocks so far this year have also reached 28.7%, 17.5%, 33.5%.

  Under the slump in heavily-positioned stocks, as of April, Melvin Capital's portfolio had a cumulative drawdown of 23% this year.

  It is worth mentioning that Melvin Capital is also one of the worst victims in the “short-squeezing war” of retail investors in the U.S. stock market in 2021. The fund suffered a huge loss of 55% that month, and the daily floating loss exceeded US$1 billion.

  In order to avoid being liquidated, the founders of Melvin Capital urgently sought help from the outside world and obtained $2.75 billion in funding to survive the crisis.

  However, entering 2022, Melvin Capital has still not been able to escape the doom of being liquidated.

In fact, until 2021, Melvin Capital has been one of the best performing hedge funds on Wall Street, with an average annualized performance of over 30%.

Despite the "Waterloo" in 2021 and 2022, the average annual return of the fund since its establishment is still 11.9%.

Wall Street tycoons are increasingly pessimistic about the market outlook

  After suffering a 1100-point plunge, U.S. stocks continued to weaken.

At the opening of Thursday, the three major U.S. stock indexes opened lower collectively. The Dow fell 0.97%, the Nasdaq fell 0.47%, and the S&P 500 fell 0.78%. The intraday Dow fell to 1.1%.

  The market's worries about economic growth prospects and profit pressures have not eased, and Wall Street investment bigwigs are increasingly pessimistic about the outlook for the U.S. stock market.

  Scott Minerd, chief investment officer at asset management giant Guggenheim, said in an interview that investors in U.S. stocks could be expected to experience "a terrible summer and fall."

He predicts that entering the second half of the year, the Nasdaq Composite will collapse, with a 75% retracement from its peak on November 19 last year (currently down about 28%), and the S&P 500 from January 2022. The 3-day high would plummet 45% (currently down 18%).

  At the same time, Jeremy Grantham, a legendary investor and GMO co-founder and chief strategist who successfully predicted two market crashes, also believes that this crash in U.S. stocks is similar to the bursting of the Internet bubble in 2000, and the S&P 500 is expected to continue. fell, or 40% from its peak.

  Previously, Marc Rowan, CEO of private equity giant Apollo Global, analyzed that with soaring inflation causing serious damage to the global economy, the Federal Reserve had to raise interest rates to respond, and U.S. stocks would continue to pull back sharply. Equity neutral valuations are still a long way off.

  The current pessimistic expectations of Wall Street institutions on the US stock market are mainly based on the following three concerns:

  First, the Fed's monetary policy is still the biggest risk point.

Federal Reserve Chairman Jerome Powell said in an interview that he will continue to raise interest rates without cutting inflation, a process that may bring some pain.

  Second, investors are increasingly worried about the U.S. economy falling into recession.

According to the analysis of CICC, from the perspective of direct reasons, earnings and growth concerns are the main factors triggering the current round of U.S. stocks; in addition, investors are also worried that the Federal Reserve may not be able to achieve the so-called "soft landing" of the economy.

  Finally, the earnings season of listed companies in the U.S. stock market continues to “explode”. Tech giants and retail consumer giants frequently report less-than-expected financial reports, which obviously aggravates the panic in the market.

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