Stocks and bonds fell as another weak sale of Treasuries raised concerns about swelling supply that could keep diving yields higher at time when the Federal Reserve is signaling rates will be higher for longer.
Longer maturities led Treasury market losses with 30-year yields rising over nine basis points to over 4.75%.
Bloomberg wrote yesterday the narrow post earnings surge in NVDA, and other big tech stocks has widened the gap between growth and value stocks further from a four-year high.
This lack of breadth has propelled the S & P 500 growth index to a record as this index is almost 50% info tech, as growth shrugs off any concerns about higher for longer rates, inferring that interest rates no longer matter.
Goldman writes hedge fund exposures to US technology behemoths hit a record high. The so called magnificent seven—NVDA, AAPL, META, GOOG, TSLA and MSFT—now account for about 20.7% of hedge funds total net exposure to US single stocks, a record concentration according to Goldman.
Goldman further writes the fear of lack of performance and “fear of missing out” has supplanted any risk aversion, a dangerous environment.
It is often written that the most obvious conclusions are those that are ignored. A massive and still growing concentration of wealth in a handful of greatly extended and overvalued names in a rising environment is a recipe for disaster. Change will come when it is least expected by some unforeseen variable.
What has changed is the velocity of change, a velocity that could potentially crush levered traders.
What will happen today?
Last night the foreign markets were mixed. London was up 0.26%, Paris up 0.25% and Frankfurt up 0.04%. China was down 0.62%, Japan down 1.30% and Hang Seng down 1.34%.
Futures are down about 0.5% as Treasury yields are around their highest levels of the year. Salesforce tumbled 17% in premarket trading on slowing sales growth. The 10-year is up 4/32 to yield 4.60%.
ANOTHER WEAK TREASURY AUCTION
Kent Engelke
Chief Economic Strategist Managing Director
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.
