Investors are getting so demanding and so nervous at the moment that not even Fed Chair Jerome Powell could make them feel better on Thursday. As a result, the market dropped for a third consecutive session and completely took out the NASDAQ’s gains for 2021.
The tech-heavy index dropped another 2.11% (or about 274 points) today to 12,723.47. It began the year at a little over 12,888. Meanwhile, the S&P slipped 1.34% to 3768.47, while the Dow was off 1.11% (or around 345 points) to 30,924.14.
The NASDAQ is down more than 3.5% for the week heading into Friday, as tech just can’t catch a break amid rising bond yields and inflation. It lost over 5% last week.
The S&P is down approximately 1.1% over these four days, but the Dow is only off by about 8 points. The latter index is benefitting from the other side of that tech rotation, as more money moves into recovery names. Of course, it hasn’t benefitted enough to close in the green over the past three sessions.
At a Wall Street Journal summit today, Mr. Powell stayed his usual dovish self and promised to be patient before making any policy changes. The economy isn’t even close to the parameters (maximum employment + inflation moving past 2%) that are needed before mixing things up.
But that wasn’t enough this time.
Apparently, investors wanted something more proactive, such as an “Operation Twist” that would sell short-term bills and buy longer-term bonds in an effort to force rates lower and further excite the economy. It’s been done before, and investors apparently want it to happen again.
In response to his statements, the 10-year Treasury yield jumped to 1.55%. It had managed to stay below 1.5% since surging to 1.6% last Thursday.
In other news, the jobless claims report was at 745,000 last week, which was about 5,000 better than expectations. That makes two straight weeks ahead of forecasts, though last Thursday’s beat was much more substantial.
The report comes after Wednesday’s disappointing ADP report and before tomorrow’s employment situation print. Expectations are for somewhere around 175K to 210K jobs being added with the unemployment rate staying at 6.3%.
Today's Portfolio Highlights:
Headline Trader: The portfolio added a couple tech disrupters on Thursday that are likely to continue changing the game as the “Roaring 20s” continue. Dan is finally getting into fintech giant Square (SQ) after watching from the sidelines for years. The tech-driven volatility has taken a 20% bite out of the company since its all-time highs on February 16, but the editor thinks this stock is only beginning to take off as “Main Street digitalization becomes a necessity”. SQ was added at a reasonable valuation on today with a 5% allocation. Meanwhile, Splunk (NASDAQ:SPLK) is getting beaten up for no good reason right now, which gives Dan a fantastic entry point to pick up an AI-powered cloud giant that is evolving into much more than a cybersecurity business. Learn a lot more about today’s moves in the complete commentary.
TAZR Trader: This ongoing selloff is opening up some tremendous buying opportunities, and Kevin took advantage several times on Thursday. While Shopify (NYSE:SHOP) was making new lows this afternoon, the editor added a 5% allocation in this cloud-based, multi-channel commerce platform. He sees good support between $1080 and $1100. Kevin also added to his Novavax (NASDAQ:NVAX) and The Trade Desk (NASDAQ:TTD) positions. Get specifics on all these moves in the complete commentary.
Counterstrike: This tech selloff is pushing portfolio positions into technical support, which is giving Jeremy an opportunity to add more to a couple solid names. On Thursday he added 4% each to eBay (NASDAQ:EBAY) and The Trade Desk (TTD). Get all the details in the complete commentary.
Insider Trader: It’s been rare to see insider buying at Big Oil in recent years, so it certainly caught Tracey’s attention when two new board members at Exxon (NYSE:XOM) bought shares this week. The last time insiders bought at XOM was during the coronavirus sell-off nearly a year ago! The portfolio now has two Big Oil plays with XOM and Chevron (NYSE:CVX). The editor also picked up Matador (MTDR), which has been in the portfolio before because insiders are much more active in this energy name. For example, an insider just bought 450 shares on Tuesday of this week. Tracey sold BridgeBio (BBIO) and Lantheus (NASDAQ:LNTH, +0.6%) to make room and will split the cash into XOM and MTDR. Get more specifics in the full write-up.
Commodity Innovators: Commodities held up better than stocks in the recent selloff, but Jeremy still wants to tidy up the portfolio a bit. The editor sold all of his metals names and some energy. The sells today included Williams Cos. (NYSE:WMB) for an 8.3% return in a little under seven months and iShares Silver Trust (NYSE:SLV) for 1.7% in less than two months. He also got rid of SPDR Gold Shares (NYSE:GLD) and Murphy USA (NYSE:MUSA) for slight losses. But there was a buy too! Jeremy added Invesco DB Commodity Index Tracking ETF (DBC) because this seems like a good place to rest while the market gets over this selling pressure. The fund was positive today in a sea of red and should have longer upside potential as the commodity and inflation story continues. Read the full write-up for more on the editor’s reasoning.
ETF Investor: "Major indexes fell sharply today after Federal Reserve Chair Jerome Powell failed to address investors’ concerns about surging bond yields and inflation expectations.
"The tech-heavy Nasdaq is now in the red for the year as earlier hot growth have been the worst sufferers lately. Tesla (NASDAQ:TSLA) shares plunged 5% today. The index had fallen into the correction territory intraday, down more than 10% from its recent 52-week high.
"Jobless claims totaled 745,000 last week, up from 736,000 the previous week but below the consensus estimate of 750,000. All eyes are now on the jobs report for the month of February due tomorrow. Economists expect addition of 210,000 jobs in February, a jump from just 49,000 in January." -- Neena Mishra
All the Best,
Jim Giaquinto
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