Uddrag fra Swissquote:
We knew that yesterday was not going to be a bright day, as Microsoft, Google and AMD have all seen a negative market reaction to their fantastic quarterly results that failed to match the huge market expectations. And because most investors have been waiting in ambush for the slightest misstep to take advantage of selling the overstretched tech rally, the tech stocks got hammered after Microsoft’s light guidance for the current quarter. Microsoft fell more than 2.5% from a record high, Google tumbled more than 7%, AMD lost 2.5% and Nvidia retreated about 2%.
Yesterday’s tech selloff was broadly expected before the session opened. What was not expected however was a surprise Q4 loss at New York Community Bancorp – which slashed its dividend following its asset purchases from the bankrupt Signature Bank led to higher loan-loss provisions and charge-offs. The bank also warned of building trouble in the office-space sector. New York Community Bancorp shares tumbled near 38% yesterday, bringing back the worries regarding the US regional banks, the commercial real estate threat, and the possibility of seeing other small regional players go into trouble. As such, the SPDR’s S&P Regional Banking ETF sold off nearly 6%, and even big banks which have largely benefited from the regional banks’ misfortune last year traded down.
Apple, Amazon and Facebook’s Meta will post results after the bell today. They’d better blow investors’ minds. Otherwise, the tech selloff is poised to gather momentum – despite the falling yields.
Speaking of yields
Resurfacing worries of another potential bank stress sent the US yields tumbling yesterday. The US 2-year yield tipped a toe below 4.20%, and the 10-year yield sank below 4% on a weaker than expected ADP report, lower than expected employment cost in Q4, on news that US Treasury will stop increasing the size of its auctions starting from May, and of course on fear that another bank stress could hurt the US growth and get the Federal Reserve (Fed) to hurry up on cutting rates to calm down the market nerves. But we are not there just yet!
The Fed has kept its rates unchanged at yesterday’s meeting as expected, they removed the statement that talked about ‘additional policy firming’ and replaced it with ‘rate cuts won’t be appropriate until the committee has gained greater confidence that inflation is moving sustainably toward 2%’.
More importantly, Jay Powell hinted at a slowdown in the pace of QT in the foreseeable future. And that’s a big deal, as unwinding QT will leave the market with more liquidity than otherwise, and all that extra liquidity that are not sucked away could continue to be in the financial markets and support asset prices. In summary, we may not see a rate cut right away, but a slowing QT sounds better for relaxing the financial conditions asset valuations than your regular rate cuts. What’s sure is that the Fed will never ever be able to pull out the GFC and pandemic liquidity out of the market. Ever. Enjoy.
Coming back to rates, Powell wanted it to be clear for everyone that a rate cut in March in UNLIKELY. Still, activity on Fed fund futures gives around 65% chance for a March rate cut as yesterday’s bank worries play in favour of a sooner rather than a later rate cut. But remember, the last time the US went through a decent banking stress, the US economy didn’t slow. Or if did, it still eked out an above average growth.
