That heightened bar, is due in part to the forthcoming Fed rate hikes. This week, tech earnings distracted investors from the central bank’s upcoming moves, but the prospect of policy tightening is still driving the market.
All assets have a different value than they did. You have this wide range of assumed rate hikes and you’re trying to reprice all these assets based on that assumption, taking into account what they’re saying for future earnings.
In the past, if you bought a dip you’d be fine. Now, it’s a little bit more of ‘well show me that if I buy the dip, I can be okay.’
*Weak numbers from U.S. tech giants including Spotify Technology SA jolted investors who had bet a strong earnings season would keep equities attractive and counter some of their lingering worries including tighter monetary policy. Markets have swung sharply and stocks are nursing losses this year as officials pare stimulus to curb inflation.*
That market cap loss also was more than double the total market cap of other social media companies, Twitter -5.56%, Pinterest -10.32%, and Snap -23.60% combined, according to Dow Jones data.
Big tech stocks such as Alphabet Inc and Microsoft Corp fell more than 3%, while Amazon.com Inc slumped 7.8%, before it was scheduled to release results.
*Tech stocks have enjoyed a dominant period amid low interest rates, as investors sought out high growth, but with inflation rising and the U.S. Federal Reserve signaling an aggressive rate-hike stance to rein it in, money managers are having to adjust portfolios accordingly.*
*People are going to start increasing allocations to value stocks, and to do that they will have to sell their growth stocks, even if they are down 15% to 30%*
*As we've gotten numbers in recent days, what we're seeing is the delivery of earnings being rewarded or penalized, and if you continue to deliver strong earnings growth, the market will reward that.*
*In a rising rate environment, as we progress through the year, we expect to see more divergence between the higher quality names, such as the megacaps, and lower quality names which are not making any money.*
*Financial technology companies saw a second day of selling, after PayPal Holdings Inc's (-6.2%) disappointing earnings* on Tuesday caused investors to question if these firms - which benefited significantly from the pandemic advancing the shift to digital payments - would justify steep valuations in 2022.
Outside of tech, Dow component *Honeywell’s shares fell 7.6%* after the company beat narrowly on profit but fell short on revenue and provided lower-than-expected guidance.
*The index declines came as investors also digested concerns about persistently high inflation from the European Central Bank with hawkish comments from Christine Lagarde. The euro spiked higher along with European bond yields. U.S. Treasuries followed the euro zone lower and the dollar fell.*
*Investors also digested a rate rise by the Bank of England and a significant hawkish shift by the European Central Bank, and weekly U.S. data on employment and business activity.*
Stocks rose Wednesday, and all three indexes gained ground over the past four sessions, with the Nasdaq surging 8% over that time span.
We got hit with a one-two punch today with the big drop in Facebook and the surprising news that the ECB has become more hawkish. The stock market had rallied in the afternoon each of the last four days, so traders were hoping that could bail us out again. When the rally didn’t materialize, traders lost a lot of confidence.
Amazon was set to report earnings after Thursday’s closing bell.
*Recent quarterly updates from corporations, weaker-than-expected economic data and a lowered forecast for growth by central bankers was helping to cast a pall on the investing landscape.*
Macroeconomists across the Street are starting to trim their growth expectations.
By: via @AlliesFin Serve Stock Market
