Equities had a major recovery yesterday from the downward volatility following the meeting on Wednesday, and continued the move up at today’s open. But then interest rates, which started rising premarket, kept rising after the open and took the wind out of the sails. This is very problematic given the high Federal budget deficit requiring new levels of funding, along with refunding maturing bonds at much higher interest rates, especially any done during rock-bottom Covid interest rates.
Global interest rates are following our lead, and corporate bond spreads have been rising, though still far below the levels seen when the Iran conflict began. prices are up another 2% today; gasoline is flat. European gas oil is up 2%, now up 40% in a month. and have given back yesterday’s gains, though copper is flat. is down 3.3% back to levels seen 3 weeks ago.
Tech was down 1% by late morning, and the is flat, helped by the Magnificent 7 being up 1.3%, led by good results from Amazon () taking it up 13.2%, followed by Alphabet () up 5%. The is down 0.3%. Semiconductors are up 0.6% while memory stocks have given back 3.1%. Apple () had beats top and bottom but guided down on higher memory prices and supply constraints. The shares are down 9.5% today (+11.0% YTD).
The interest rate moves are very concerning and have hit the more highly leveraged small caps, with the down 1%. The trend remains volatile. Without earnings being so strong, the interest rate moves would be bringing much more damage. For investors willing to look beyond a resolution in Iran, which should lower interest rates significantly, this is probably an attractive buying opportunity.
