Technology Stocks Pull Down the S&P 500, Can Other Sectors Pull It Higher? – Yahoo Finance

Futures are pointing to a higher open. News and announcements were light before the open which gave investors a chance to digest Tuesday’s selloff. The selloff was orderly which may suggest that the selloff wasn’t a taper tantrum but a “normal” September slump where money managers are rearranging their portfolios for the final quarter. Therefore, investors can look at the winners and losers to try and determine which sectors and industry groups could finish the year strong.
The first hour of trading may be key to how well the market holds. After the open, investors will digest August's pending home sales and crude oil inventories. Crude inventories have the potential to move markets because the global energy crises are at the forefront of investors’ minds. Crude oil (/CL) was trading slightly lower pre-market as the dollar tests 2021 highs.
Troubled Chinese real estate developer Evergrande (OTCMKTS: EGRNF) announced plans to sell its $1.5 billion stakes in Shengjing Bank. The stock rallied 15% in pre-market trading.
Investors continue to monitor the debt ceiling debate out of Washington D.C. On Tuesday, the Senate banking committee heard from Treasury Secretary Janet Yellen Tuesday who warned that Congress must increase the debt ceiling by October 18 or “catastrophic” consequences would follow. Alongside Yellen as Fed Chair Jerome Powell warned Congress of inflation pressures lasting longer than expected due to ongoing bottleneck issues in the supply chain.
Tech Tumbled Hard as 10-Year Yield Spikes
The Nasdaq 100 (NDX) took a nasty fall, down 2.8% with some of the largest Tech names dragging down the broader market. Tech behemoth Microsoft (NASDAQ: MSFT) dropped about 3% while Apple (NASDAQ: AAPL) declined around 2%. Facebook (NASDAQ: FB) entered deeper negative territory, down 3.3%,
But chipmakers like Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) arguably took the worst punishment, plunging more than 4% and 5% respectively. Applied Materials (NASDAQ: AMAT) got smacked, falling 6%. Semiconductors were the hardest hit among all industries in Tech.
Although the Communications sector took the brunt of the beating in yesterday’s session and Tech finished second to last, you’re probably wondering why there seems to be a “tech wreck” every time 10-year Treasury yields spiked. The most common answer is that Tech stocks, like all stocks, are in competition with bond yields. The market’s like a discounting mechanism. Investors have to ask themselves whether they’ll get more bang for their buck over the next year investing in bonds or Tech stocks. Bond yields will tell you exactly how much you expect to earn over a period of time.
When it comes to Tech stocks, their values rest on their earnings potential, which is more uncertain. Plus, you’ve got the inflation factor to consider, which not only erodes the value of the dollar but adds even more uncertainty to the Tech earnings speculation.
Keep in mind that because of Tech’s heavy weighting in the SPX, it tends to have a bigger impact than any other sector on the overall index. So, strength in lower-weighted sectors like Energy may help individual stocks, but won’t lend much help to the overall index.
Something to Chew On
While it’s not the buffet that earnings season brings, investors were treated to a healthy breakfast Tuesday morning when United Natural Foods (NYSE: UNFI) climbed 23.73%. UNFI topped the FactSet consensus number of $0.80 per share with an impressive adjusted EPS of $1.18 per share. To top it off, UNFI raised its forward outlook. For the dinner course, after the close, had food company Cal-Maine (NASDAQ: CALM) beat analyst estimates by reporting a smaller loss than expected. The stock was up more than 3% in after-hours trading. Perhaps some staple stocks are just what investors need to nibble on after the sell-off.
On the other hand, Micron (NASDAQ: MU) also announced earnings after the close, sending it 4% lower in after-hours trading. MU beat earnings estimates but was disappointed with a lower-than-expected earnings forecast.
The recent road rally in automakers was refueled with Ford (NYSE: F) announcing a major investment in a new plant in Kentucky and Tennessee. Ford is going after Tesla (NASDAQ: TSLA) by investing heavily in electric cars and batteries. In addition to assembling new cars and trucks, the compound will make batteries and recycle old ones completing a green lifecycle for their green vehicles.
China Losing Its Chi?
However, charging electric cars is getting a little harder overseas. Barron’s reported that China’s energy crisis is going unnoticed with the focus on troubled real estate developer Evergrande. Like Europe, China is seeing shortages in coal and natural gas, and its energy woes are compounded by strict emissions goals in line with China’s promise to help with climate change. Numerous factories have had to be shut down, including three electronics companies that supply Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA).
However, it’s not just large tech companies that are feeling the pain. Many Chinese factories have also been shuttered, leading analysts from Goldman Sachs (NYSE: GS) and Nomura (NYSE: NMR) to downgrade their forecasts for the Chinese economy. The energy problems add to the growing list of investor concerns for China.
Europe, Asia, and China are now competing for resources. Britain has seen a few 1974-style lines at the pump as the country scrambles for truck drivers. To address the issue, government officials are looking at granting temporary work visas to immigrants who left after new Brexit-related immigration laws. Prime Minister Boris Johnson has suggested using military personnel to deliver fuel.
The scramble for fuel has led to rallies in natural gas (/NG), crude oil (/CL), heating oil (/HO), and coal (/QL).
CHART OF THE DAY: THE ENERGY BLOWOUT. The Energy Services Select Sector Index (Energy $IXE—blue, Financials $IXM—silver, Materials $IXB—pink, Consumer Discretionary $IXY—white, Industrials $IXI—salmon, S&P 500 SPX—red/green, Technology $IXT—yellow, Consumer Staples $IXR—red, Health Care $IXV—tan, Real Estate $IXRE—green, Utilities $IXU—gray) lead the recent rally, returning about 11% over the last five days. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.
Rotating Sectors: The recent rally has seen a shift in stock leadership. It’s no surprise with energy crises popping up around the globe that the Energy sector is leading the charge. Rising energy prices may add to the inflation woes, which often translates to higher interest rates and the Financials sector as a beneficiary. Also related to inflation, is the third sector—Materials. These three groups could set the stage for some time.
On the other side, Health Care, Real Estate, and Utilities are bringing up the rear. These sectors tend to do better during bearish times, so it could be a good sign for stocks that investors aren’t piling into them. Perhaps there’s more growth to be had despite the energy crises and rising rates.
Trouble with the Curve: The bond market is adjusting to the inflation and energy data with yields rising particularly in the 10- and 30-year maturities. Monday’s hotter-than-expected durable goods orders prompted a spike in the 30-year yield (TYX) which is now trading above 2%. The 10-year yield (TNX), which often correlates with mortgage rates, has risen from 1.31% on September 1 to 1.53% on September 28.
Bond yields move opposite to bond prices which means that rising yields are tough on bullish bond speculators. Higher yields in longer maturities may attract investors buying new bonds. This means the short end of the yield curve could struggle to find buyers. In order to find buyers, short-term yields will likely rise.
Is Value En Vogue?: Another side to rising yields and a more hawkish Fed is that value investing may be en vogue once again. The trend of falling rates for decades has prompted growth investing to dominate value investing. The trend is so long that value seems retro chic.
Value investing is the selection of stocks based on book and intrinsic values. It’s a fundamental analysis approach to stock market investing made popular by Benjamin Graham and Warren Buffett. Value investors tend to be long-term oriented and focus on stocks that are undervalued and often pay dividends.
Right now, value investing may be in the hipster stage, look to the cool kids to start jumping on the trend.
TD Ameritrade® commentary for educational purposes only. Member SIPC.
Image Sourced from Pixabay
See more from Benzinga
Click here for options trades from Benzinga
Troubling Tuesday: Second Selloff in Seven Sessions Comes as Tech Gets Hit by Yield Climb
Treasury Yields Hit Highest Level Since June, Weighing On Tech Sector In Particular
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Before Jamie Siminoff sold his Ring doorbell company to Amazon.com , he hustled. And he's still thinking like an entrepreneur.
Wall Street ended firmer on Wednesday in a partial rebound from the previous day's broad sell-off, with remarks from U.S. Federal Reserve Chairman Jerome Powell and the ongoing debt ceiling debate keeping a lid on gains. The S&P 500 index and the Dow Jones Industrial Average advanced, but the Nasdaq Composite closed lower as Treasury yields halted their ascent. All three remain on course to post monthly declines, with the bellwether S&P 500 snapping a seven-month winning streak.
By Geoffrey Smith
By Peter Nurse
* Dollar rises vs yen to highest since late March 2020 * Euro falls to lowest since early November * U.S. govt shutdown looms as debt ceiling impasse unresolved (Adds new comment, updates prices, dateline, byline) By Gertrude Chavez-Dreyfuss and Iain Withers NEW YORK/LONDON, Sept 29 (Reuters) – The dollar surged on Wednesday to a fresh 10-1/2-month peak against rival currencies, boosted by increased expectations for a reduction in the U.S. Federal Reserve's asset purchases by the end of the year and an interest rate hike, possibly in late 2022. The greenback also fared well despite an impasse in Washington over the U.S. debt ceiling that threatened to plunge the government into a shutdown. The world's largest reserve currency, seen as a safe haven bet at times of market stress, has strengthened in recent days as investors instead focus on fears of a global slowdown, a rise in energy prices and higher U.S. Treasury yields.
Barclays cut Micron Technology, Inc. (NASDAQ: MU) price target from $110 to $87. Micron shares fell 3.6% to $70.45 in pre-market trading. Bernstein raised the price target on The Boeing Company (NYSE: BA) from $252 to $279. Boeing shares rose 2.6% to $224.11 in pre-market trading. Citigroup raised Eli Lilly and Company (NYSE: LLY) price target from $210 to $265. Eli Lilly shares rose 2.4% to $226.84 in pre-market trading. JP Morgan cut the price target on HP Inc. (NYSE: HPQ) from $35 to $30. HP
By Dhirendra Tripathi
(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.Most Read from BloombergThe Country That Makes Breakfast for the World Is Plagued by Fire, Frost and DroughtThe Unstoppable Appeal of Highway ExpansionHSBC Bets Big on China as Pressure Mounts in LondonHow Los Angeles Became the City of DingbatsWhy the Gaza Strip May Be the City of the FutureFederal Reserve Chair Jerome Powell and his counterparts at the European Central Bank, Bank of J
Memory-chip maker Micron Technology late Tuesday beat Wall Street's targets for its fiscal fourth quarter. But MU stock fell in extended trading.
The Canadian dollar weakened against its U.S. counterpart on Wednesday as the greenback surged to a fresh high and the benchmark 10-year U.S. Treasury yield climbed to its highest level since June, mainly due to expectations of at least one rate hike next year and gradual removal of stimulus by the end of the year.
The Fed has set a different, higher bar for raising interest rates, including reaching full employment and inflation at 2% and on track to stay durably above that level for some time. "If we should get there in the time frame of next year that would be a tremendous win for the economy," she said, but "I don’t expect that to be the case."
(Reuters) -The first phase of a multi-year research project the Boston Federal Reserve is doing with the Massachusetts Institute of Technology on the technology that could be used for a digital dollar is nearly done and could be released over the next month or so, a Boston Fed official said on Wednesday. The initial findings from the Boston Fed research are "basically done" and will include open-sourced code that could serve as a potential model for a central bank digital currency, or CBDC, said Jim Cunha, a senior vice president with the Boston Fed, during a virtual panel focused on payments.
Typically, the fourth quarter bodes well for the S&P 500
Yahoo Finance's Brian Cheung joins the Yahoo Finance Live panel with the latest Fed news.
Resolving "tension" between high inflation and still-elevated unemployment is the most urgent issue facing the Federal Reserve right now, Fed Chair Jerome Powell said Wednesday, acknowledging the central bank's two goals are in potential conflict. "This is not the situation that we have faced for a very long time and it is one in which there is a tension between our two objectives…Inflation is high and well above target and yet there appears to be slack in the labor market," Powell said at a European Central Bank forum, an apparent reference to the 1970s bout of U.S. "stagflation" that combined high unemployment and fast-rising prices. At the Fed's most recent meeting policymakers lifted their inflation forecasts for this year to 4.2% – more than twice the targeted level of 2%.
Crypto gets a new superstar – Mr. Goxx, the hamster. China's crypto crackdown raises legal concerns. Korea discusses new virtual asset law. We'll have more on those stories and other news shaping the cryptocurrency and blockchain world in this episode of "The Daily Forkast."
The chip company’s guidance suggests that the good times, which have lasted for the past year, could be coming to an end for now.
For Fed watchers, Sept. 22 was a “eureka” moment that could help determine where Wall Street heads in October. That was the day Fed Chairman Jerome Powell helped light up the market by hinting that a “taper” could be closer than ever. While the month ahead includes plenty of potentially market-moving events—including the start of earnings season, potential drama in Washington and China, and a first look at the government’s estimate for Q3 economic growth—the Fed remains the number one story. Why
Group Managing Director and Senior Portfolio Manager of TCW Group Diane Jaffee joins Yahoo Finance to discuss how wages will be a major data point to watch in the next jobs report, predictions for November’s FOMC meeting, and the consequences if Congress fails to avoid a government shutdown.
By Dhirendra Tripathi

source