Surging Treasury yields and rising oil prices are calling the tune across markets right now.
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In the last day, bitcoin exhibited a dynamic display, marked by significant fluctuations and upward movements across different periods. Upon hitting a peak at $69,210 per unit on Mar. 5, the cryptocurrency dipped below the $60,000 threshold, only to climb again on Wednesday, positioning itself in the $66,500 to $67,500 bracket. Bitcoin Over the course […]
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The tech-heavy Nasdaq-100 has gone 303 trading sessions without a pullback of 2.5% or more, the third-longest stretch since 1990, according to Jonathan Krinsky, chief market technician at BTIG.
While this doesn’t necessarily mean the artificial-intelligence-driven boom in U.S. stocks is ripe for a selloff, Krinsky thinks the market is overdue for a bout of volatility.
“Some sort of shakeout is likely coming, in our view,” Krinsky said.
The Invesco QQQ Trust Series ETF
QQQ,
which tracks the Nasdaq-100 and is one of the most popular U.S.-traded ETFs, has marched to 14 straight record highs in 2024. It’s most recent record arrived on Friday, when the ETF rose 1.5% to finish at $445.61.
According to FactSet data, the most recent pullback of 2.5% or more occurred on Dec. 15, 2022, when QQQ fell 3.4%.
Notably, the Nasdaq-100 has been achieving these records without the help of Apple Inc.,
AAPL,
once considered an indispensable constituent of the index. While Apple was down 9.1% so far this year, the Nasdaq-100 was up 8.3%, according to FactSet. Divergence in the performance of a popular group of megacap technology stocks has been growing since the beginning of 2024, while all of the so-called Magnificent Seven tech stocks helped drive gains for the S&P 500 in 2023.
Take Monday’s session for example: Nvidia Corp.
NVDA,
is up 3.6% on Monday, while Tesla Inc.
TSLA,
was down 7.2%. Alphabet Inc.
GOOGL,
was down 2.8%. And Apple
AAPL,
was down 2.5%.
“… [T]he dispersion under the surface shouldn’t be ignored. Yes, it’s encouraging to see some broadening beyond the ‘AI’ trade, but the continued one-way move in many momentum names is ultimately going to have some ramifications, even if only short-term in nature,” Krinsky said.
The weakness in several megacap names weighed on the Nasdaq on Monday.
Both the Nasdaq-100
NDX,
which includes the 100 largest nonfinancial stocks trading on the Nasdaq, and the Nasdaq Composite
COMP,
which includes more than 3,000 stocks listed on the exchange, finished 0.4% lower. The S&P 500
SPX
also eked out a loss after briefly turning positive. The Dow Jones Industrial Average
DJIA
finished lower as well.
BlackRock, the world’s largest money management firm, plans to announce layoffs in the coming days of about 3 percent of its global workforce, Fox Business has learned.
The job cuts of around 600 employees, which have yet to be reported, are being described internally as routine, according to a source familiar. Last year, BlackRock did a similar round of layoffs gauged on employee performance metrics, the source added.
Shares of BlackRock rebounded in 2023, up 6 percent after falling 21 percent in 2022. New customer money into BlackRock’s solid Exchange Traded Fund business exploded last year with $187 billion of inflows into the products that follow a basket of securities and trade like stocks on major exchanges.
On Wednesday, BlackRock is expecting approval from the Securities and Exchange Commission for its new Bitcoin “spot” ETF — the first time a crypto investment product tracking the daily price of the world’s most popular digital coin will be approved by securities regulators to trade on a public stock market. Other asset managers are also expecting approval for their ETFs.
BLACKROCK, STATE STREET FACE SUBPOENAS IN HOUSE ESG PROBE
A BlackRock spokesman would not comment on the layoffs. BlackRock is scheduled to announce fourth quarter earnings on Friday.
One possible impetus for the layoffs is that BlackRock, after years of wild growth in assets under management or AUM, is settling into a more mature phase in its business. Analyst consensus for earnings in its fourth quarter projects a 2.46 percent decline year-over-year to $8.71 a share.
BlackRock finished the third quarter of 2023 with $9 trillion in AUM though the firm has seen significant asset declines since it reached a peak of more than $10 trillion in 2022 amid wobbly financial markets. The decline in assets also came as BlackRock became a political lightning rod over its embrace of Environmental Social Governance investing, or ESG, which directs investment dollars into public companies in the sustainable energy space, or those that are taking steps to reduce their carbon footprint and advocate corporate governance measures such as boardroom diversity.
DECEMBER JOBS BREAKDOWN: WHICH INDUSTRIES HIRED THE MOST WORKERS LAST MONTH?
The firm has been de-emphasizing its ESG business in the U.S. amid the controversy, Fox Business has learned. U.S. portfolio managers are no longer required to consider ESG metrics when not using ESG funds. In 2023, many so-called green investment funds have seen declines in asset amid weak performance as investments in sustainable energy products fail to produce significant returns.
Company founder and CEO Larry Fink told Fox Business he won’t use the mention of the letters E-S-G any longer because of the controversy it has stirred up in political circles.
US ECONOMY ADDS 216K JOBS IN DECEMBER, BEATING EXPECTATIONS
As top Republicans, including several running for the GOP presidential nomination, have attacked BlackRock and ESG, those running pension funds in red states have yanked about $6 billion from BlackRock funds as a form of protest.
Noticeably quiet from the BlackRock bashing is the GOP front-runner, former President Donald Trump. One reason may be because BlackRock once managed Trump’s fortune, estimated in the billions of dollars. In 2017, Trump said of Fink: “Larry did a great job for me. He managed a lot of my money. I have to tell you, he got me great returns.”
People close to BlackRock tell Fox Business that savings from the job cuts will be used to expand into growth businesses such as technology investing and investing in so-called alternative products as opposed to stocks and bonds.
ESG, meanwhile, remains a big business with BlackRock’s foreign customers, including large sovereign wealth funds in Europe and the Middle East. Mark Wiedman, head of BlackRock’s client business, speaking at a recent event sponsored by the news outlet Semafor, called ESG “a demand from clients,” with around $1 trillion in pure sustainable assets being managed by BlackRock.
Original article source: BlackRock layoffs coming as firm matures, ESG pullback and Bitcoin ETF approval
U.S. stocks were clearly in danger of a technical pullback after a breakneck rally off the October lows, but Wall Street’s sudden Wednesday downdraft has traders and analysts weighing whether more pain may be in store.
“Perusing hundreds of charts, some Technology stocks are extremely extended. In addition, many of 2023’s laggards are also very extended after huge recoveries. That doesn’t leave too many attractive charts, at least in the near term,” said technical analyst Mark Arbeter, president of Arbeter Investments, in a Thursday note.
“So, this was either a one-day wonder or the start of a decent pullback,” he said.
Read: Four out of five industry sectors are overbought, say Citi strategists, as Morgan Stanley index turns negative
The Dow Jones Industrial Average
DJIA
dropped 475.92 points, or 1.3%, on Wednesday for its biggest one-day percentage drop since Oct. 3, ending a streak of five straight record finishes. The S&P 500
SPX,
which had rallied to less than 1% away from its Jan. 3, 2022, record close, dropped back 1.5% to close just below 4,700 for its biggest percentage decline since Sept. 26; the Nasdaq Composite’s
COMP
1.5% drop was the largest since Oct. 26.
Stocks on Thursday took back some of the previous session’s lost ground, with all three major indexes on track for a higher close.
See: Why stock-market bulls say ’embrace weakness’ after biggest stumble in 3 months
Arbeter said trendline support for the S&P 500 lies at 4,675, while the rising 21-day exponential moving average is at 4,621. He views 4,600 as important chart support since it marked the start of the last upside breakout.
Arbeter Investments
Both the Dow and Nasdaq had rallied for nine straight days before Wednesday’s setback. The rally, which had accelerated a move off the October lows, had left major indexes significantly overbought based on technical indicators, analysts said, but not everything had pointed lower.
“Yes, price momentum and market breadth were extremely overbought, but the major indexes had yet to trace out any daily bearish momentum divergences, while breadth has remained strong,” Arbeter said.
Breadth refers to the number of stocks participating in a move. Momentum divergence refers to a shift in the relationship between the movement of an asset’s price and a momentum indicator, such as the relative strength index.
Arbeter said the percentage of S&P 500 stocks above their 50-day moving average had spiked to 91%, while the percentage of stocks in the Nasdaq-100
NDX
-tracking Invesco Trust QQQ Series ETF
QQQ
hit 95% on Dec. 19.
Based on data going back to the end of 2001, such “breadth thrusts” usually occur in the early or middle stages of a bull market, Arbeter noted, though there was a “really bad signal” that happened in October 2007. Another negative signal came in January 2018, leading to an immediate pullback that was followed by a solid rebound, though another thrust preceded the market’s late-2018 meltdown.
“In the near-term, we would not be surprised by a pullback, but based on price and breadth, the bull looks like it has further to go,” he said.
The 10-year Treasury yield continued to pull back from 5% on Friday after moving tantalizingly close to surpassing that level in the previous session.
The yield touched 5% at 5:02 p.m. Eastern time on Thursday, only to drift back down, according to Tradeweb data. It ended Friday’s New York session down by 6.3 basis points at 4.924%.
Rising Middle East tensions gave way to renewed safe-haven demand in government debt on Friday that not only sent the 10-year yield
BX:TMUBMUSD10Y
lower, but dragged down rates on everything from 3-month Treasury bills
BX:TMUBMUSD03M
to the 30-year bond
BX:TMUBMUSD30Y.
Investors were trying to catch the proverbial falling knife by taking advantage of a cheaper 10-year Treasury note, the product of recent selloffs. Analysts warn that it’s difficult to have much short-term conviction in catching that knife, however, given the likelihood that the selloff could return.
One big reason is the onslaught of new supply from the U.S. Treasury as the result of the government’s growing borrowing needs, which is raising the risk that investors will keep demanding more compensation to hold long-dated debt to maturity.
On Oct. 30 and Nov. 1, which is the same day as the Federal Reserve’s next policy decision, Treasury is expected to provide updated guidance on its borrowing needs and auction sizes. Treasury’s refunding announcement could even upstage the Federal Open Market Committee — creating “fertile ground for a continuation of the selloff in Treasuries,” said BMO Capital Markets rates strategists Ian Lyngen and Ben Jeffery.
Over the next several weeks, “it becomes much easier to envision a surge in Treasury yields in anticipation of the upcoming coupon supply,” they wrote in a note on Friday. While the 10-year yield has stopped shy of 5%, “we continue to expect this milestone will be reached shortly.”
Stock-market investors have been focused on the prospects of a 5% 10-year yield because such a level would dent the appeal of equities and make government debt a more attractive investment by comparison.
Read: Why stock-market investors are fixated on 5% as 10-year Treasury yield nears key threshold
As of Friday, the 10-year yield, used as the benchmark on everything from mortgages to student and auto loans, has jumped 163.9 basis points from its 52-week low of almost 3.29% reached on April 5. The 10-year yield hasn’t ended the New York session above 5% since July 19, 2007.
Meanwhile, all three major stock indexes
DJIA
SPX
COMP
ended the day lower as the prospects of a widening conflict in the Middle East triggered a flight-to-safety trade into Treasurys.
Taking a step back, a 5% 10-year yield would imply that a Goldilocks-scenario of a U.S. economy — one that’s neither too hot or too cold, and able to sustain moderate growth — “is here to stay for a decade,” or that the Fed’s main interest-rate target needs to be materially higher on average over the next decade, according to BMO’s Lyngen and Jeffery. One of the biggest questions facing policy makers is whether the economy might be moving into a new stage in which even higher interest rates down the road could be required to cool demand and activity.
Though BMO Capital Markets is biased toward lower yields into the weekend given the absence of major economic data on Friday, technical indicators “continue to favor higher rates in the near-term,” and “our conviction that 5% will ultimately be traded through has grown.”