With the tech sector under the microscope markets continue to search for support as stocks slide with rising rates.
We’ve discussed (warned?) about this for a long time. Tech has grown to be a disproportionately large portion of the major indexes. So, if tech has a bad day, everybody has a bad day.
Of course, in this scenario, everyone seems to be having a bad day. The Fed has announced higher rates are coming. Now everyone is guessing as to just how high those rates will go and how much QT (quantitative tightening) the markets must price in.
The Fed may be backed into a corner on this one. With all the stimulus and Covid money dumped into the economy inflation has finally taken hold. Businesses can’t find workers for many service jobs. Supply chains are still broken. So rates, pragmatically, must go up if we’re to find any kind of stability in this situation.
The Feds suggested three rate hikes to start. Markets are suggesting much more than that though.
Judging from the rapid rise in price of food, energy, housing, labor, and just about everything else, the Fed may be the ones playing Pollyanna right now. Most investors under age 60 don’t have any knowledge outside of history books for how this worked before. And even then, what drove the prices higher in the 1970’s is not the same force the market is experiencing today.
Looking out too far is a fool’s errand right now. There is no telling if this market finds a foothold or falls. If sentiment continues to shift, things may continue to decline from here. The futures are indicating this is the start to the week.
It appears the next area of support for the S&P 500 is between 4531-to-4545. If that area is breached, it’s probably down to 4595. With the trend so decidedly negative right now, there’s very little up-side resistance to this market. The much bigger concern at this point is a sell-off.
This week is a shorter week because of yesterday’s closure on MLK day. Look for higher volatility this week. The big news day will probably be Thursday this week, so the whole week could be a bit of a wild ride. Hang in there!
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