Business & Investment

Stock prices could fall further as interest rates rise and Big Tech drags the market

Trader on the floor of the New York Stock Exchange, with Blend sign, July 16, 2021.

Source: NYSE

Strategists expect tech and large-cap growth names to drive sales after the stocks sell out on Tuesday.

NS Interest rates skyrocket in the last few sessions Stabbed the name of the market, especially growth. At its highest on Tuesday, the benchmark 10-year Treasury yield rose to 1.56%. That’s about a quarter of a move since the Federal Reserve Board last Wednesday.

NS S & P 500 Sessions decreased by 2% Nasdaq It decreased by 2.8% due to the concentration of technical names in the index. Technology fell 2.9%, with 10 out of 11 S & P 500 sectors down.Energy is the only advancer, increased by 0.4%

Katie Stockton, founder of Fairlead Strategies, said, “We are seeing a reduction in gap-downs as megacaps are now significantly reduced in the 2% to 5% range.” Stated. Apple, Amazon, Facebook, Nvidia When Microsoft..

She said these names were “obviously the biggest resistance in the stock market.” “It’s emotional because they’re the biggest.”

Stockton in addition to those stocks Tesla, About 25% of the S & P 500.

“Keep an eye on the momentum behind them,” she said. “Only their footprints cause problems. Doing this affects emotions. People depended on Google and Microsoft to never go down. Now they are being checked for reality. increase.”

Stockton added that he is seeing a negative target of 4,238 on his previous level of support, the S & P 500. The S & P 500 ended Tuesday’s session at 4,352.63.

CFRA’s chief investment strategist, Sam Stovall, said he was hoping for a sale. He also said the S & P 500 could test the 200-day moving average of 4,128. Stovall said that when it goes down to that level, it’s more than 5% lower than the current level and about 10% down from the peak to the trough.

Below important levels

The S & P 500 recovered below the 50-day MA on Tuesday after recovering and rising at the end of last week. Last week, 50 days were severely violated. 50 days is the average of the last 50 closing prices and is considered a negative momentum indicator if the index falls below it.

Stovall said it’s important that large cap stocks are leading to a decline.

“When the general begins to be shot, it shows that everyone is vulnerable, so technology seems to have fallen 2.5% and interest rates have risen.

The names Big Tech and Growth are sensitive to higher rates because their high reputation is based on future growth and cash flow. When interest rates rise, the value of their future cash flows is discounted.

But Oppenheimer’s technical analyst Ali Wald said the fact that Big Tech is for sale means that these popular large-cap growth stocks are already showing a big dip in many other things. He said it meant joining the stock.

“It wasn’t spilling on a big cap, and now it’s spilling. We see it as a sign of surrender,” he said. Wald added that he sees an additional downside to the July lows of the S & P 500, which is around 4,230.

Stovall said the fix would be contained and would not be a bear market. “Unless we have forecasts of earnings, GDP and interest rates, I don’t think this is going beyond the revision,” he said.

Stock prices could fall further as interest rates rise and Big Tech drags the market Stock prices could fall further as interest rates rise and Big Tech drags the market

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