Wall Street cautious in the aftermath of the record close of the Dow Jones and the turnaround of the Nasdaq, which discounted the rise in US yields by dropping 1.3%.
After 4 pm Italian time, the Dow Jones is flat around 36,824 points; the S&P loses 0.10% to 4,788 points, while the Nasdaq drops 0.50% to 15,545 points.
Watch out for the outlook on the US stock exchange presented by Dennis Gartman, president of the University of Akron Endowment, during an interview with Bloomberg radio.
Known for being bearish on equities, Gartman said he expects the US stock market to fall between 10% and 15% in 2022: in his opinion the factor that will trigger the sales will be the hike in rates by the Fed.
As chairman of the University of Akron endowment fund, Gartman cut his equity exposure by 10%, while pointing out that the risk of such a strategy is not being able to take advantage of any further Wall Street hikes.
Although Treasury rates are turning around today – with 10-year rates dropping from 1.71% yesterday to around 1.658% – tech stocks continue to be under pressure.
For US yields, according to what the consensus believes, today’s yield should in fact be confirmed as just a simple parenthesis, to be considered in the context of a trend that, in 2022, should remain positive. The US interest rate boom is explained by investors’ bets of a more hawkish Fed.
On the other hand, from the same dot plot published in the last meeting of the FOMC – the monetary policy arm of the American central bank led by Jerome Powell -, it emerged that the Fed expects on average at least three rate hikes in the course of 2022, for respond to runaway inflation in the United States.
Michael Schumacher, head of Wells Fargo’s rate strategy, highlighted the record jump in Treasuries rates, noting that the 10-year yield hike in the first session of 2022, or January 3, was the highest of the year. first trading day of the new year since 2001.
In 2001, rates rose in the first session of the year by 24 basis points, while the increase the day before yesterday caused the 10-year rate to soar from 1.51% last Friday to over 1.64%, according to TradeWeb data.
However, Schumacher does not believe that 10-year rates will rise above the 2.25% threshold, at least this year, even if, of course, it will be US inflation that will determine the market trend.
Greater clarity will come to the market with the publication, scheduled for today, of the minutes of the Fed relating to the last meeting in December.
On that occasion, in the face of fed funds rates that were left unchanged in the range between zero and 0.25%, the Fed announced a strong acceleration of tapering, a sort of turbo tapering. And the dot-plot showed precisely that, out of a total of 18 FOMC exponents, 12 estimate at least three rate hikes in 2022.
Interviewed by Cnbc Ian Lyngen, head of BMO’s US rate strategy division, commented on the boom in Treasury rates, stating that “the optimism on the economy, in a context of inflation concerns, will bring ten-year rates to the 2% during the first quarter, and from there the economy and the Federal Reserve will determine how high they go further. ”
For Lyngen, the trend in Treasury yields “will depend on the data and tones coming from the Fed.” However, “we’re not going to hit 3% (for 10-year Treasury rates). I think we’ll hit the high at the start of the year.”
Tech stocks continue to suffer from the prospect of a more hawkish Fed as future earnings of related companies tend to become less attractive to investors amid higher interest rates.
Apple continues to retrace, after falling on the eve, thus moving away from the target of the market value of $ 3 trillion that it grabbed and surpassed the day before yesterday, during the first session of Wall Street in 2022.
Meta Platforms (formerly Facebook) is also down -0.90%, while the Tesla stock is positive.
Among the hi-tech stocks, Salesforce also stands out, down by more than 6% and among the worst stocks in the S&P 500, following a downgrade by UBS analysts. UBS also cut Adobe’s rating, causing the stock to drop to nearly -5%.
Pfizer, on the other hand, did well, + 2% approximately, benefiting from the positive opinion of Bank of America analysts, who wrote that the profits of the pharmaceutical giant deriving from treatments against Covid provide the stock with a margin of upside.
Buy on Beyond Meat, which rises by more than 4%, benefiting from the news regarding the debut from next Monday, in the US restaurants of KFC, of the “Beyond Fried Chicken”, the fried chicken without meat.
Warren Buffett’s conglomerate Berkshire Hathaway also did well, in the spotlight after Apple, its main investment, crossed the $ 3 trillion mark.
Known for not being a fan of the hi-tech world, from which he has always kept a safe distance, Warren Buffett began buying up Apple shares in 2016, eventually accumulating, by mid-2018, a share of capital equal to 5%, at a cost of $ 36 billion. That stake is now worth $ 160 billion, thanks to the buy (and also buyback) hangover that led the giant to grab the record $ 3 trillion threshold, never tested before in the corporate world: a value higher than that of the entire capitalization of the cryptocurrencies, to that of the GDP of the UK, France and Italy and six times the value of JP Morgan, equal to 30 times that of General Electric.
From the macroeconomic front, the ADP report was released today which revealed that, in December, the United States economy created 807,000 new jobs in the private sector, well beyond the growth of 375,000 units expected by the consensus of analysts, and after the payroll increase by 505,000 in November.
Great expectations at this point for the publication, scheduled the day after tomorrow on Friday 7 December, of the US employment report for December, which will be released at 2.30 pm Italian time (change in non-agricultural employees, unemployment and wages). On the latter front, the Bloomberg consensus expects an increase in new employees (by 400,000 units) and a drop in the unemployment rate.