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Nasdaq-100 Falls In Correction Territory As Losses Rise For Tesla, Zoom, Peloton
Wall Street apparently decided to get ahead of the Fed by staging a “taper tantrum” before any actual collapse. There is no sign that the Fed is reversing its accommodative monetary policy in any way, but investors seem confident the day will come. Sentiment strengthened Thursday when Fed Chairman Jerome Powell used the magic word “inflation” in public remarks, noting that the reopening could create “upward pressure on prices.” Basically, Powell took everyone by surprise, a little wavering at the accommodating tone he had last week. He appeared to see central banks starting to cut monetary stimulus a little earlier than expected. Wall Street responded by ramping up sales, dropping bonds and stocks amid fears of an overheating economy. T-bill yields have exploded to 1.55%, not far below last week’s one-year high and nearly 15 basis points above this week’s lows. We saw this morning that the stock market was shaking when yields were above 1.45%, and it happened quite quickly today. Keep in mind, however, that around 1.5% is historically very low. There are growing fears that the Fed may find itself “behind the curve,” as the saying goes, which means it could wait too long to tighten policy as the economy emerges from the pandemic. Powell, of course, needs to focus on boosting jobs, and that’s not really the case. This means the Fed is in no rush to roll back anything. There were also rumors about the $ 1.9 trillion stimulus package, which the Senate began voting on Thursday. This is not a political column, but some economists say the level of spending in the bill would have made more sense a few months ago, but could be more than what the economy needs now, according to the Washington Post. It could also play a role in market concerns about possible overheating, although not all economists necessarily agree with this view. The S&P 500 Index (SPX), which ended down around 1.3% at 3,768, well outside its session low, is now down almost 4% from Monday’s close . It hasn’t posted a new high since February 16 when it hit 3,950, a point that is now almost 5% below. Typically, a 10% drop is considered a correction. The Nasdaq (COMP) did worse, falling more than 2%. The small-cap Russell 2000 (RUT) picked up the slack with a 2.7% decline. It didn’t appear that any of the indices gained much momentum in the close, so we will have to watch the futures market closely overnight for any hints on tomorrow. Jobs data early tomorrow will likely tell the story. Technical scrutiny continues, but Apple and Microsoft outperform From an industry perspective, technology continues to lead, but on the wrong side of the ledger. It fell more than 2.2% on Thursday. People are taking profits in some of the jumbo jets that have been big beneficiaries of the Fed’s easy money policy. Tech’s semiconductor segment, which for some time had overtaken Tech as a whole on ideas that an economic recovery would increase demand for chips, was slapped even harder on Thursday, down more than 4%. It was interesting to see two of Tech’s biggest light stations, Apple Inc (NASDAQ: AAPL) and Microsoft Corporation (NASDAQ: MSFT), outperform the larger industry a bit. If there is a technological revival, these two so-called “mega-caps” should probably be part of it. AAPL shares are now down 17% from their all-time high at the end of January. In addition, some of the top names in communication services like Alphabet Inc (NASDAQ: GOOGL), Facebook, Inc. (NASDAQ: FB), ViacomCBS Corporation (NASDAQ: VIAC) and AT&T Inc. (NYSE: T) have had at least days OK. Perhaps this is because at times like this people tend to use more names they know and get along with. The Nasdaq-100 (NDX) is now in correction mode, down 10% from highs. Stocks like Tesla Inc (NASDAQ: TSLA), Zoom Video Communications Inc (NASDAQ: ZM) and Peloton Interactive Inc (NASDAQ: PTON) are picking it up, all down 20% from their highs. Financials also slumped Thursday after leading things higher earlier this week, while industrials and materials – two sectors that normally do well in times of economic recovery – were hammered. Boeing Co (NYSE: BA) and Archer-Daniels-Midland Co (NYSE: ADM) both lost ground. It was interesting to see financials falling despite rising yields, but they did come back a bit at the end of the day, and that might just reflect a general rally underway. Maybe when we look back we’ll see this day in a context where people are turning more to “value” stocks and moving away from growth stocks, but it’s a swing that has evolved a lot these days. last months. If you’re wondering about technical support for the SPX, it evolves quickly. On Thursday it was close to the 50-day moving average of 3817, but that came to a halt within minutes of the session’s start. Now you have to look at 3725, near the low in early February. The SPX rebounded at the end of Thursday’s session (see chart below), but watch below if it digs lower tomorrow. The 100-day moving average of 3683 is reportedly in sight. The SPX last traded below its 100 day MA in late October and rebounded twice last fall. The Cboe Volatility Index (VIX) rose above 30 at one point intraday before falling to 28. It is still above the 20-25 range it was in for several weeks before. this market hiccup. GRAPH OF THE DAY: OH, THESE 50 DAYS. The S&P 500 Index (SPX – candlestick) has flirted with the 50-day moving average (blue line) on several occasions in recent days, including a close yesterday just at the level. The 3723 session low was essentially the same place where the 50 days featured prominently just over a month ago. The SPX settled below 50 days on January 29, but on February 1 it managed to settle above, then took off upward (see purple line). Data source: S&P Dow Jones indices. Source of the graphic: the thinkorswim® platform. For illustrative purposes only. Past performance is no guarantee of future results. Is good news good or bad these days? The pandemic gave the economy a boost in 2020 – no arguments there – and we are still feeling the effects. But when you consider the collective action of the Fed and the tax authorities – as well as the general agreement that better days lie ahead – the market has been able to largely ignore the bad news. And arguably, he was able to take the ‘bad news is good’ argument, where a weak string of numbers helped spur a faster and stronger stimulus. All the while, the march towards a vaccinated population continues. Against this backdrop, it’s easy to see why sometimes good news and bad news could push the market to new heights. Now, many seem to be wondering if we are at an inflection point – the one that returns the markets to their normalized response pattern, which means bad news is bad for the markets and vice versa. At least, that’s the general sentiment after seeing the market’s reaction to inflation booms. Tomorrow morning we will have a fresh look at the employment situation in the United States. Regardless of the number reported, it is possible that the markets are interpreting it as going in the right direction, but not quickly enough. Tomorrow’s payroll number is expected to post an addition of 200,000 jobs, according to consensus briefing.com. Under normal circumstances, it could be an out-of-park number, but we continue to catch up after the pandemic. This would still be an improvement from just 49,000 in January and a negative result in December. These numbers just aren’t where you’d expect them to be if the economy really comes back. Rate hikes still unlikely If you’re worried about the Fed’s rate hike, don’t expect it anytime soon, even as the number of jobs improves dramatically and yields continue to rise. While many inflation indicators are flashing – especially commodities like crude and copper – weak employment means we’re unlikely to see anything from the Fed. “The rate hike reflects the optimism surrounding an improving economy,” wrote Sam Stovall of research firm CFRA in a note earlier this week. “(Rates) will have to rise a lot more before they cause concern by forcing the Fed to raise short-term rates sooner than expected.” The chance of a single 25 basis point hike by the end of the year stands at 4.1%, according to CME Group’s federal funds futures contracts. That said, there are options for the Fed if it wants to lower the slope of the yield curve (measured by subtracting the 2-year yield from the 10-year rate). In 2011, the Fed made a “twist” where it started selling its short-term paper and buying longer-term Treasuries to manage the so-called “long end” of the curve. In this scenario, longer-term yields would likely fall, relieving parts of the economy that are more vulnerable to the pressure of rising long-term rates. Think about housing and cars. The last thing the Fed probably wants to do is let yields run out of control and start cutting the recovery. TD Ameritrade® reviews for educational purposes only. SIPC member. Photo by Tech Daily on Unsplash See more from Benzinga Click here for Benzinga options trades More pressure on tech sector to start day, with Apple, Microsoft both lower Direction hard to find as market continues to slide cut before key jobs data Benzinga does not provide investment advice. All rights reserved.
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