Something is cooking under the surface
“The wise man is one who knows what he does not know.” - by way of Brad Free
For the week that has now set like the sun in the west, the Dow was basically stagnant when day was done. On Friday big high tech Coronavirus winners faded, suggesting a rotation into cyclical stocks set primed to benefit if the Pandemic goes away The Dow on the week bopped up rose 35.92 points, or 0.11%, to 31,494.32 this past week. The S&P 500 index went sidewise but ended up 0.71%, to 3906.71, and the Nasdaq declined 1.57%, to 13,874.46.
On Friday Applied Materials Inc was among the top boosts to both the Nasdaq and the S&P 500, rising 5.3% to $119.46, after reporting its numbers, and on the heels of a global chip shortage. But it will catch a vortex and give up most of that Monday. [Technology hardware I find of more interest than software (excluding software intrinsic to chip development).] Finding a tech tock that is not sporting robust multiples has been impossible. What would be a good reference for reasonable? Something in relation to this: the Nasdaq-100 index fetches just five times 2021 sales.
There follows a link to Barrons and an interview with Steven Major, global head of fixed income research at HSBC. [See "A lot of Red Flags" on Bloomberg.] The perturbations of the market today seems to have as source some very deep bubbling in fragile interest rates and perceived inflation moves. He discusses muddy links between bond yields and the S&P.
Major scales: "There's something interesting going on" and "Something is cooking under the surface." The yield on 10-year Treasury debt jumped to 1.31% Thursday from 1.1% just a week ago. Now, the difference between .1 and .3 doesn't seem that great to me. "Jump" seems over said. But maybe its like the butterfly wing fluttered in S America that spurs a tornado in Oklahoma.
As a friend pointed out the ticks are large in relative terms. And this will be central concern of markets for weeks to follow.
By the same token, there have been many influences gathering, all aimed at identifying a bubble breaking. It may be that the recent yield run-up was ceased [sic] on - was an excuse - to flip the deck on boom. But without prolonged bloodletting, the evidence isn't yet there that the trend has toward Tech is ended.
"When we say something is fool proof we need to be sure not to underestimate the fools." - Paul Krugman
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