A rout in some of the world’s biggest technology companies dragged down the broader equity market, outweighing gains in companies that stand to benefit the most from an economic rebound.
The S&P 500 fell after earlier climbing on bets that central banks can move toward tighter policies to fight inflation without derailing the economy. The Nasdaq 100 tumbled, led by losses in giants like Apple Inc. and Tesla Inc. Commodity, financial and industrial shares rose. European equities jumped as the region’s policy makers unveiled a gradual pullback of pandemic stimulus, while the pound gained as the Bank of England unexpectedly raised rates. Bitcoin slumped.
Central banks are weighing measures to fight price pressures while balancing risks to growth amid coronavirus challenges. European Central Bank President Christine Lagarde unveiled forecasts showing a strong economic rebound along with an outlook for faster inflation. The Federal Reserve said Wednesday it will accelerate the pace at which it tapers bond purchases, and projected rate hikes through 2024.
This is a very whippy environment for trading. No sooner do we see a rebound than most of its is given up. This is attributable to the divergence between central bank pronouncements about their expected rate hikes and what the market believes is possible. Short-dated bond yields contracted today to reflect the expectation that if the Fed were in fact to raise rates three times, there will be economic consequences.
There has been a lot of talk lately about the potential the Powell put has been abandoned. However, does anyone really believe the Fed is blind to the economic damage a 20% pullback would imply. It would only be appropriate to question the existence of Fed assistance following a time of significant stress, not before.
The bigger question right now is whether China’s long-standing willingness to inject liquidity during times of stress is still present. I believe it is likely fiscal policy in China will ease next year but there is not real evidence the market is willing to give that conjecture the benefit of the doubt at present.
With the Dollar easing, gold rebounded today. The price has been rangebound for most of the year but has a firming pattern when redenominated in a large number of currencies. It feels like one would have to have been blessed with the patience of Job to have continued to hold against a background of significant outperformance by the tech and crypto sectors. That period of underperformance may now be ending.
Both silver and gold shares rebounded today from their respective lows.
Amazon posted a large upside key day reversal today but did not follow through on the upside today. Investors have endured lengthy ranges in the share in the past and been reward handsomely for doing so. Every time Amazon has come close to the 1000-day MA has been a buying opportunity. That would need to change to significantly challenge the long-term bullish bias. Medium-term, the share is testing the 200-day MA at present a sustained move below it would greatly increase scope for a retest of the 1000-day MA.Back to top