Benzinga
Nasdaq-100 falls in correctional ground as losses to Tesla, Zoom, Peloton mountain
Wall Street apparently decided to lead the Fed by placing a “taper tantrum” in front of an actual taper. There is no sign that the Fed will return its accommodative monetary policy in any way, but investors appear to be convinced that the day will come. The sentiment grew stronger on Thursday when Fed Chairman Jerome Powell uttered the magic word, ‘inflation’, in public remarks, noting that reopening could create ‘upward pressure on prices’. Actually, Powell surprised everyone, kind of wavering over the dove-like tone he had last week. He sounded as if he could see central banks starting to scale down the monetary stimulus a little earlier than expected. Wall Street has responded with more selling, throwing away bonds and shares amid concerns over economic overheating. Treasury yields boomerang up to 1.55%, not far below last week’s annual high and nearly 15 basis points above this week’s low. We noticed this morning that the stock market was shaky when returns were above 1.45%, and that happened pretty quickly today. However, keep in mind that 1.5% or so is historically very low. There seems to be a growing fear that the Fed, as the saying goes, could get ‘behind the curve’, meaning it could basically wait too long to tighten policy as the economy emerges from the pandemic. Powell obviously needs to focus on reviving jobs, and that’s not really happening. This means that the Fed is not in a hurry to withdraw anything. There was also noise over the proposed $ 1.9 billion stimulus, which the Senate began voting on Thursday. It’s not a political column, but some economists believe that spending levels would make more sense a few months ago, but according to the Washington Post more than the economy needs now. It could also affect market concerns about possible overheating, although not all economists necessarily agree with the view. The S&P 500 Index (SPX), which was 1.3% lower at 3768 than its low session, is now almost 4% lower than the close on Monday. This is not a new high since February 16, when it reached 3950, a point that is now almost 5% lower. A 10% drop is usually considered a correction. The Nasdaq (COMP) performed worse, declining by more than 2%. The small-capsule Russell 2000 (RUT) increased the rear end by a decrease of 2.7%. It did not feel like any of the indices had come to an end, so we will have to watch the futures market overnight for clues about tomorrow. Employment data early tomorrow will likely tell the story. Tech Check continues, but Apple and Microsoft are performing better. Sector perspective technology remains ahead, but on the wrong side of the ledger. It fell more than 2.2% on Thursday. People are taking profits in some of the high-flyers who have had the beneficiaries of the Fed’s easy money policy. The semiconductor segment of Tech, which outperformed Tech overall over the idea that an economic recovery would increase demand for chips, hit even harder on Thursday, by more than 4%. It was interesting to see that two of Tech’s largest light positions, Apple Inc. (NASDAQ: AAPL) and Microsoft Corporation (NASDAQ: MSFT), outperformed the broader sector. If there is to be a Tech revival, the two so-called “mega-caps” will probably have to participate. AAPL shares are now 17% lower than their daily high at the end of January. Some of the most important names for communication services like Alphabet Inc (NASDAQ: GOOGL), Facebook, Inc. (NASDAQ: FB), ViacomCBS Corporation (NASDAQ: VIAC) and AT&T Inc. (NYSE: T) had at least OK days. . This may be because people at such times tend to go into more names that they know and that they did well with. The Nasdaq-100 (NDX) is now in correction mode, with 10% lower than the highest. Stocks like Tesla Inc (NASDAQ: TSLA), Zoom Video Communications Inc (NASDAQ: ZM) and Peloton Interactive Inc (NASDAQ: PTON) are taking it on the chin, which is all 20% off their peaks. Finances also crumbled on Thursday after hitting higher earlier this week, while Industrials and Materials – two sectors that are normally doing 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 Finances decline despite rising returns, but it returned a bit at the end of the day, and it may just reflect that a general regrouping is underway. Maybe if we look back, we will see this day in the context that people are going more to ‘value’ stocks and not of the growth names, but it is a seesaw that has gone back and forth a lot over the last few months. If you’re wondering about technical support for the SPX, change it quickly. After Thursday, it was close to the 50-day moving average of 3817, but it broke minutes in the session. Now you should look at 3725, near the beginning of February low. The SPX jumped off of it late in Thursday’s session (see chart below), but watch below as it cuts further tomorrow. The 100-day moving average of 3683 will be in sight. The SPX last traded below its 100-day MA at the end of October, bouncing twice last fall. The Cboe Volatility Index (VIX) rose above 30 at some point intraday before falling towards 28. It is still higher than the 20-25 range it has been in for a few weeks before this market hiccup. GRAPH OF THE DAY: OH, THAT 50-DAY. The S&P 500 index (SPX – candlestick) has flown several times in recent days with the moving average of 50 days (blue line), including a close yesterday at the level. The session low of 3723 was essentially the same place where the 50-days were a little more prominent than a month ago. The SPX settled below the 50-day on January 29, but on February 1, it managed to establish itself within it and then rose upward (see purple line). Data source: S&P Dow Jones indices. Graph source: the thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results. Is good news good or bad these days? The pandemic has complicated the economy in 2020 – no arguments there – and we are still feeling the effects. But if you consider the collective action by the Fed and fiscal authorities – plus the general agreement that better days lie ahead – the market could largely pick up bad news. And this is probably the argument for tackling ‘bad news-is-good’, where a weak number of numbers could provide the impetus for a faster and stronger stimulus. All the while, the march to a vaccinated population continues. Against this background, it is easy to see why good and bad news could sometimes push the market to new heights. Many people now seem to be asking if we’re on a turning point – one that puts the markets back in their normalized reaction mode, which means that bad news is bad for the markets and vice versa. At least that is the general feeling after the market’s reaction to inflation rumble. Tomorrow morning we look again at the state of the work in the US. Regardless of the number reported, it is possible that markets will interpret it as being in the right direction, but not fast enough. According to the consensus drawn up by Briefing.com, tomorrow’s payroll will show an addition of 200,000 jobs. Under normal circumstances it could be a number outside the park, but we are still catching up after the pandemic. That would still be an improvement of just 49,000 in January and a negative result in December. These numbers are just not what you would expect if the economy really came back. Rate hikes that are still unlikely If you are worried about the Fed hike rates, you should not expect this anytime soon, even if the job numbers will improve a lot and the returns will continue to rise. Although many inflation indicators are flickering – especially commodities such as crude and copper – the poor working picture means that we are unlikely to see anything from the Fed. “Rising rates reflect optimism surrounding an improving economy,” research firm CFRA’s Sam Stovall wrote in a note earlier this week. “(Rates) will have to move much higher before they cause concern by forcing the Fed’s hand to raise short-term rates earlier than expected.” The chance of even a single 25-basis point increase by the end of the year is 4.1% according to the futures contracts of CME Group Fed. There are, however, a few options for the Fed if it wants to lower the rising yield curve (measured by subtracting the 2-year yield from the 10-year yield). In 2011, the Fed took a “turn” where it began selling its short-term paper and buying long-term treasury to manage the so-called “long end” of the curve. In this scenario, longer-term yields are likely to decline, relieving pressure from parts of the economy that are more vulnerable to pressure from rising long-term rates. Think of housing and cars. The last thing the Fed is likely to do is snatch yields out of hand and start cutting the recovery. TD Ameritrade® comments for educational purposes only. SIPC member. Photo by Tech Daily on Unsplash See more from Benzinga Click here for options from Benzinga More pressure on the technology sector to start the day, with Apple, Microsoft Both LowerDirection, hard to find as the market goes ahead with key job data © 2021 Benzinga.com Benzinga does not provide investment advice. All rights reserved.