The Nasdaq Composite is down 1.2% and trading at the lows of the day. The selling acclerated after a strong US services survey from the Institute for Supply Management. Rather than cheering a resilient economy, the market is fretting about higher interest rates in a classic 'good news is bad news' response.
The shift is consistent with market action last week as equities cheered bad news that hinted the Fed rate hiking cycle was over.
The dynamic highlights the delicate balance in markets at the moment. Obviously, a recession isn't good for anyone but neither are overly-burdensome rate hikes. For now, the market continues to be more concerned about rates than growth. That's underscored by Goldman Sachs, which this week lowered is recession probability for the US to 15% from 20% in the next 12 months.
Among the laggards today are some of the big names that have lifted the Nasdaq throughout the year including:
- TSLA -3.9%
- NVDA -3.6%
- AAPL -3.2%
Weighing on tech stocks are rising Treasury yields, especially at the front end which is most sensitive to the Federal Reserve. Two-year note yields are up 6.9 bps to 5.03%. I don't see a big scope for that to rise from here but seasonals are negative for stocks and they've had a great run, so the big tech names could certainly retreat further from here.
