S&P 500 futures dropped 0.8% and Nasdaq-100 futures retreated even more, suggesting that tech stocks are poised for further losses. Investors are betting that inflation is likely to climb steeply in coming months, and this is sending a shiver down the spine for tech/growth investors. Yesterday the 50-day moving average for the NASDAQ broke, and today it will open below the 100-day moving average. Meanwhile, the S&P 500 is just a day removed from an all-time high and still rests loftily above both its short and longer-term moving averages.
The VIX is jumping higher, it's up above 22 as we write, quite a difference from closing at 16.7 last Friday. Despite markets set to open lower this morning, the U.S. dollar isn’t getting much of a bid. The Yen and Euro are today’s risk off winners. Even overnight, the C$ dipped into the 1.20s. Global markets are all significantly lower in trading this morning, and bond yields have moved slightly higher ahead of tomorrow’s highly anticipated CPI print. Actually, U.S. yields are almost flat while European yields are all up 3-5bps, which explains the euro strength.
So why does ‘inflation fear’ get a free pass to explain market weakness? While inflation rising YoY is an absolute, the big debate is how transitory this higher inflation will be. Should it persist, the Fed could reduce its $120bn of monthly asset purchases that have boosted equity markets through the pandemic more rapidly than it currently intends to. This leaves the most richly valued shares, such as those of big tech companies, most vulnerable to a correction.
Besides the inflation fears, the market is also grappling with a fuel shortage. Gas stations along the U.S. East Coast are starting to run out of fuel as North America’s biggest petroleum pipeline fights to recover from a cyberattack that has paralyzed it for days. It may take until the weekend for the pipeline to fully reopen.
The mood is improving across the pond. Sentix's index of eurozone investor morale has risen
from 13.1 last month to 21 this month, the highest reading since March 2018. Respondents to a Reuters poll had predicted a gain to 14.
Happy National Eat What Your Want Day! The possibilities are endless, and go figure. None of the delicious food I like is a vegetable. Well I guess a lettuce slice on a burger counts. Ever wonder how there is basically a ‘national day’ for everything, and how we know about it? Well, there’s a site for that
, of course.
Since the bottom of the pandemic, the stock market has had a record recovery. However, just because the stock market is at all-time high's, doesn't mean all stocks are
. Nothing works forever, and there are many new investors learning that new hard truth. Diversion
: Is this a new type of workout
we are not aware of?