High PE Mega Tech Is Pulling Back

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In his Daily Market Notes report to investors, Louis Navellier wrote: 

Two-year over 5%, ten-year over 4%, and stocks pull back over 1%.

The non-dovish Fed minutes, more hawkish Fed-Speak, and hot jobs data have led to rates rising towards the high of the year. Bets on a July hike are now over 90% and odds of a second rate are also rising. The VIX is up 17%, above 16.5.  The last time interest rates were here in March of this year, the VIX was over 26. 

Regional banks are down 3% on the day, down 7.3% in the last month, -31.4% YTD. JP Morgan, the biggest US bank, is down 1.9% on the day. Interest rates around the globe are rising on the move. This is hitting gold, down $18 to $1,909, and crude oil, down 2% to $70.25, and the US Dollar Index is back over 103.

Mega Tech Pullback

High PE mega tech is pulling back, with the notable exceptions of Microsoft (NASDAQ:MSFT) which is still green at an all-time high, seen as the most to benefit from AI (besides NVIDIA), and Meta which has launched a new Threads application to compete with Twitter.

Even though the JOLTS job openings number was slightly lower than expected, it remains near 10 million. The shocking number was the ADP non-farm employment change, which was forecast to fall from 267K to 228K, and posted 497K, the highest number since December ’21. Tomorrow we’ll get the payroll data from the Bureau of Labor Statistics.

Rising Fed Fears

As the trading day continues stocks are getting weaker and pulling down other international markets. We’re seeing stocks 20-to-1 in the red today, a reflection of rising fears that the Fed’s plan to continue to tighten will create a recession.

After such a strong run, a pullback in stocks is not unexpected. Before the Fed’s increase in late July, we’ll see plenty of earnings which will have much more influence on 3rd quarter returns. 

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