|
|
By Jeffrey
Cane | Wednesday, January 5 Sooner,
Faster. A few trading days
do not necessarily make a trend, but the dash out of high-growth tech
stocks has become the market story of early 2022. The prospect of higher interest rates has
taken the shine off those stocks, richly valued because of the promise
of their future earnings. Today, minutes from Federal
Reserve policy makers indicated that those higher
rates could be coming earlier and at a more aggressive pace than many had
expected, which would further diminish the present value of their
earnings. The tech-tilted Nasdaq
Composite tumbled 3.3%, its steepest one-day decline
since Feb. 25. The Nasdaq 100 ended down 3.1%; the NYSE
Fang+ index fell 3.3%. The S&P 500 closed down 1.9%. All 11 of its sectors
ended in the red, led by real estate, technology, and communication services,
while 398 components fell. The winners that resisted the broad
selloff were chiefly old school today: Nucor (up 4.8%), Merck (up 2.4%), AT&T, (up 2.2%),
Pfizer (up 2.0%), and Signature
Bank (up 1.8%.) The Dow
Jones Industrial Average, which had record closes
on Monday and yesterday, finished down 1.1%, while the Russell
2000 declined 3.3%. The Fed minutes released today were of
the Dec. 14-15 meeting of the Federal Open
Market Committee, when policy makers
pointed to three rate increases in 2022. The minutes showed that policy
makers were also weighing a faster timetable. FOMC participants, the
minutes said, "generally noted that, given their
individual outlooks for the economy, the labor market, and inflation, it may
become warranted to increase the federal funds rate sooner or at a faster
pace than participants had earlier anticipated." Lisa
Beilfuss of Barron's has more on the minutes here. "The fact that FOMC participants are
discussing faster and more aggressive rate hikes, alongside a faster pace of
balance sheet normalization (QT) than the last hiking cycle, indicate that
the Fed put for the stock market has been repriced lower," wrote Cliff
Hodge, chief investment officer for Cornerstone
Wealth. Treasury yields jumped after the afternoon release of the
minutes. The yield on the two-year note rose to 0.828%, its highest level
Feb. 28, 2020. The yield on the 10-year Treasury settled higher at
1.703% today. The yield has climbed for three consecutive days. The rise in yields has
"destabilized" growth and tech stocks, says David
Lebovitz, a global market
strategist at JPMorgan Asset Management, according
to the Financial Times. “We are not going for the high-fliers,” he
told the FT. “We are going for the companies that can generate the earnings.” Elsewhere, crude
oil extended its new year's rally, with futures
rising 1.1%, to $77.85 a barrel. The U.S.
dollar was little changed against other major
currencies, while gold settled 0.6% higher, at $1824.60 an ounce. Some of the speculative air coming out of
stocks might have exited Bitcoin as well. It traded down this afternoon, to
$43,658. Yesterday, Goldman
Sachs analyst Zach
Pandl said in
a note that Bitcoin could reach $100,000 if investors came to
consider the cryptocurrency really as digital gold, and its market share of
the “store of value” market were to increase to 50%. Bitcoin has far to go to reach that level,
but it could benefit if the market becomes more volatile. CoinDesk
notes that the ratio of Bitcoin's market capitalization to the
total market for cryptocurrencies is now at its lowest since April 2018.
Should there be turmoil, crypto traders may sell other coins for the
relative safety of Bitcoin. The year could still be full of twists for
investors. Barron's is now accepting nominations for the third
annual Barron's 100 Most Influential Women in U.S. Finance.
The deadline for submissions is Jan. 15, 2022. Apply here. |
|
|
DJIA: -1.07% to 36407.11 The Hot Stock: Nucor +4.8% Best Sector: Materials -0.01%
|
No comments:
Post a Comment