Led by the mega caps, equities fell on concern over tighter US curbs on chip sales to China, spurring a rout in the sector that has powered the advance since October. This news was unforeseen thus perhaps creating a selling vortex as ownership of this sector is at record highs. It is a very over owned and overbought trade.
Who is left to buy when selling commences?
The NASDAQ 100 had its worst day since December 2022, falling about 3%, the Magnificent Seven declined about 4% but the Russell 2000 was down about 1%. The Dow advanced about 0.6% while the S & P 500 fell about 1.4% even as most of its members posted gains. The VIX or “fear gauge” spiked to the highest level in about two months.
There was little market reaction to the President’s plan for national rent control. Under his proposal, which exempts new construction, landlords with 50 or more units would agree to either cap rent increase at 5% or give up federal tax breaks. The plan is expected to last two years.
There is overwhelming evidence rent control leads to both less housing and lower quality housing. It also reduces mobility. When policy makers add exemptions, lower income people tend to end up with worse housing and higher rents. These are several reasons that rent control is one of the few policies nearly all economists, regardless of political affiliation, dislike.
Is the proposal DOA? Is the President pandering to the progressive wing of the Democratic Party to ensure their support especially as several high-profile Democratic donors commented yesterday that they would not contribute to the President’s reelection campaign? Moreover, a high profile and progressive Democrat, Adam Schiff calls on the President to drop out of the race.
Speaking of which, the President stated yesterday in a taped interview with BET (Black Entertainment TV) that he would consider dropping out “if a medical condition” emerged.
The President, however, has said repeatedly that none of his doctors have told him he has a serious medical condition.
Last night the foreign markets were up. London was up 0.62%, Paris up 0.57% and Frankfurt up 0.24%. China was up 0.48%, Japan down 2.36% and Hang Seng up 0.22%.
Futures are bifurcated as Dow futures are down 0.25% and NASDAQ futures up 0.25%.
There is little reaction to the headlines that Senate Majority Leader Chuck Schumer stated that it would be better if the President bowed out of the race according to ABC News and in a private conversation former House Speaker Nancy Pelosi told Biden that he could not defeat Trump according to CNN.
As widely reported, the President was diagnosed with COVID for the third time and is in isolation in Delaware. On the surface, it seems like things could not get much worse for the President.
The 10-year is off 7/32 to yield 4.12%.
