Rising interest rates are expected to negatively impact valuations, especially shares that are viewed as trading at “lofty valuations.” As widely discussed, yields across the spectrum have increased around 50 to 60 bps since the Federal Reserve lowered interest rates about 5 weeks ago.
Because it is/was expected that the central bank would continue lowering the overnight rate, many believed that longer dated US debt will continue to decline in yield as firms amassed the largest long positions in Treasuries in over three years.
Prior to October, Treasuries had been rallying for five months, marking the best run in 14 years according to Bloomberg.
Talk about a massive Whipsaw!
Even with yields rising, to the surprise of most analysts on Wall Street, The Magnificent Seven also rose, trading to levels not experienced in several months.
Two of the Magnificent Seven have posted results that have exceeded expectations, perhaps negating the negative of rising rates. Will the trend continue?
After the close both META and MSFT posted results. META “failed to inspire” sending shares lower by 4%. MSFT’s results were also met by a tepid response, sending shares down by 4%.
After the close both AAPL and AMZN post results.
At 8:30 the PCE or the primary inflationary indicator utilized by the Fed is released. The data is expected to be nominally higher than last month’s readings.
Tomorrow the all-inclusive October labor report is released. What broad-based conclusions can be made.
Last night the foreign markets were down. London was down 0.79%, Paris down 0.93% and Frankfurt down 0.56%. China was up 0.42%, Japan down 0.50% and Hang Seng down 0.31%.
Dowa and NASDAQ futures are down 0.5% and 1.25%, respectively. The 10-year is up 6/32 to yield 4.27%.
