Hi Everyone,
Despite the negative day at the level of the major indices, most of the main sectors closed the day little changed, with only communication services finishing significantly lower due to Google parent Alphabet’s (GOOGL, -1.8%) and AT&T’s (T, -2.3%) weakness. Thanks to the pullback in long-dated Treasury yields, rate-sensitive utilities, and real estate stocks showed strength, but tech stocks failed to join the rally. Consumer-related issues had a promising day, just as energy stocks and materials did, but financials and industrials trod water together with the defensive healthcare sector.
Traders said that today’s choppy session was likely the “calm before the storm” on the Street, as the rest of the week is unlikely to remain this quiet. As one trader explained, “The dip in Treasury yields helped the stability in U.S. stocks today, in the face of the global selloff in risk assets, but the looming inflation reports mean that today’s drop in volatility will likely prove temporary.”
While semiconductors were hit hard today in the wake of a research report predicting a late-year price drop in some segments of the tight chip market, the shift would be great news for a host of industries. Automakers Ford (F, +3.7%), General Motors (GM, +1.5%), and Tesla (TSLA, +1.7%) pushed higher thanks to the report, with the latter company’s strong sales in China also helping the sector. In addition, the normalization of the chip market could also help ease the mounting inflation fears, especially if energy prices were also to take a breather.
The minutes of the Fed’s latest meeting will be released tomorrow afternoon, and investors are hoping for some clarity with regard to the next steps of the central bank following the rate-induced correction of the past six weeks. The way members of the FOMC approached inflation will be under scrutiny in tomorrow’s minutes, especially in light of the recent surge in global energy prices. Treasury yields are hovering around their recovery highs across the curve amid increasing price pressures. While a dovish surprise could cause a pullback in rates, investors will likely face higher yields in the coming months.
“Knowledge is of no value unless you put it into practice.”
Anton Chekov
As always, have a great evening and stay tuned!!
