Dow is soaring as Big Tech crash: Fed, recession fears and the road ahead for stocks

Last week gave us the talk of two markets, the big tech heavyweights taking a toll that makes market veterans recall the dot-com crash while the Dow Jones Industrial Average rose and the Blue Chip gauge hit an all-time high of October. “You’re a tug-of-war,” said Dan Suzuki, chief investment officer at Richard Bernstein Advisors LLC (RBA) in a telephone interview. For the tech sector, especially Megacap, performance has been a major stumbling block. For all other things, the market was oversold in the near term, he said, while at the same time growing optimism about expectations that the Fed and other major global central banks will be less aggressive with tightening monetary policy in the future, he said. Read: Market expectations are starting to move in the direction of a slower Fed rate hike, Suzuki argues. Technology stocks are likely to underperform their peers over the long term after driving the market for the past 12 years. Earnings closed sharply higher after the 2020 COVID-19 pandemic outbreak. “There’s been a big bubble in major parts of the stock market for over a year,” Suzuki said. “We think this is a bubble-busting process and we probably have to go further,” the Dow DJIA +2.59% said. It surged nearly 830 points (2.6%) on Friday, marking a two-month high and a weekly gain of more than 5%, according to Dow Jones Market Data, the October increase in the rain gauge was 14.4% as of Friday, January 1976. It was the highest monthly gain since and could be the biggest gain on record if held until Monday’s close, it’s been a tough week for many of Big Tech’s biggest beasts, but on Friday the tech-focused Nasdaq Composite COMP, -8.39% and the tech sector rebounded sharply: the tech-focused Nasdaq is up more than 2% on the week, the S&P 500 SPX +2.46% is up nearly 4% this week, the tech giants have a market cap of more than $255 billion last week Apple Inc. AAPL, +7.56% came out of the carnage, and rallied Friday as investors looked okay on mixed earnings reports Facebook parent Meta Platforms Inc. META, +1.29% after a disappointing earnings streak; Google parent Alphabet Inc. GOOG, +4.30% GOOGL, +4.41%, Amazon.com Inc. AMZN, -6.80% and Microsoft MSFT, +4.02% Mark Hulbert: Tech Stocks Crash – How You Can Know When This Is a Buy Again Dow Five companies together lost a total of $3 trillion in market cap this year, according to Jones Market Data Comments: $3 trillion loss: Big tech’s terrible year is getting worse Aggressive rate hikes by the Fed and other major central banks This year, the value of technology and other growth stocks is expected to increase earnings and cash flow. It was the hardest hit because it was based on . into the distant future. The concomitant rise in Treasury yields, considered risk-free, increases the opportunity cost of holding riskier assets like stocks. The higher the expected income, the greater the damage. RBA’s Suzuki said excessive liquidity (a key factor in all bubbles) also contributed to the technical weakness. And now, investors see new risks to Big Tech earnings from an overall slowdown in economic growth, Suzuki said. “Many people have the idea that this is a secular growth stock, so it won’t be affected by the ups and downs of the overall economy. If you look at the earnings record of this stock, empirically it’s not at all true,” he said. Tech’s outstanding performance during a COVID-affected recession is misleading investors as the sector has benefited from a unique situation that has made households and businesses more reliant on technology at a time when incomes are soaring due to government fiscal stimulus. can give In a typical recession, tech gains tend to be economically very sensitive, he said. The Fed’s policy meeting will be a major event over the coming week. Investors and economists are overwhelmingly expecting policymakers to deliver another mega 75bp (0.75 percentage point) rate hike at the end of Wednesday’s two-day meeting, but Chairman Jerome Powell says a smaller December may be on the table. Expectations are rising. . However, as all three major indices remain bearish, the question for investors is whether the rebound this week will continue unless Chairman Powell signals a downward shift in expectations for a rate hike next week. Note: Another massive Fed rate hike is expected next week, making Powell’s life difficult. This expectation is based on Caterpillar Inc., the head of the global economy. CAT, +3.39%. Art Hogan, chief market strategist at B. Riley Wealth Management, told MarketWatch’s Joseph Adinolfi on Friday, “The Dow has benefited because the technology is very light and very heavy in energy and industry.” That was the secret to our success.” Meanwhile, the performance of the Invesco S&P 500 Equal Weight ETF RSP (+2.08%, up 5.5% in one week) is less technical than the market cap-weighted SPDR S&P 500 ETF Trust SPY (+2.38%). Sevens Report Research founder Tom Essaye said in a note on Friday that “traditional segments of the economy, including those traded at low valuations, are proving resilience since broad markets rebounded almost two weeks ago.” “If you step back, this market and economy is starting to remind you more broadly of the 2000-2002 setting,” he said. “Extreme technical weakness weighed on the leading index, but it was a time when markets and traditional parts of the economy performed better.” “I can’t argue with the fact that we’ve already been signaled and there are signs that the next cycle won’t look like the last 12 years,” he said.

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