Tech Trek… The initial panicky reaction this morning as investors fretted over a modest, if rapid, rise in yields, has since worn off a bit, thanks to cooler heads prevailing (many believe rates are far from being raised for various reasons). Putting the 10Y in perspective, it is at 1.35%, well below any level it traded at prior to the Covid crash of 2020--- and financial conditions are still close to the loosest they have ever been. In that same vein, stocks bounced off their lows after Fed Chair Powell’s prepared testimony to Congress eased fears of a policy change. Powell said price pressures remain mostly muted and the economic outlook is still “uncertain.” Despite the reassurance, the Nasdaq is down 1.8%, as investors try to come to terms with the thought that in a rising rate environment, their math starts to change. Over the past six weeks, a record $19 bn has flowed into tech funds, according to EPFR global data. The S&P information technology sector is down for a sixth straight day, the longest losing streak since August 2019 and the Russell is down 2.3% in the past 2 days. Investors are also hastily taking profits in the pandemic winners whose valuations have reached historically high levels ---Tesla and Apple have traded down 13% and 4.5% respectively, in the past 2 days (Apple down 11% this month). Could this be the beginning of market jitters or just a bit of a much expected rotation into cyclicals (energy and financials are two of the top performers today), while tech takes a backseat (for once).
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