By: Kent Engelke | Capitol Securities
Many are stating there is no place to hide. At casual glance, it appears all sectors are crumbling. Yesterday, the must owned technology stocks were again routed at the same time the industrials took a pounding. Last week, the consumer non-durables had great difficulty.
The catalysts are many, but I would focus on two. The first is rising interest rates. The 10-year Treasury is now at the highest level in four years, the result of greater economic activity and perhaps the commencement of QT. The second potential catalyst is earnings. Results have generally met lofty expectations, but as noted last week more is required.
Technology based trading dominates the markets, trading based upon momentum, earnings and interest rates. In many regards, liquidity is virtually absent as speed and cost of execution are viewed as more paramount than market stability mechanisms; mechanisms that are absent because of regulatory fiat.
I reiterate, long held thesis money is now gravitating back to Main Street from Wall Street. In my view, this nascent trend will become more pronounced.
In my view, passive investing has reached its apex. I still cannot comprehend that there are more indices than listed securities. Wow!
What will happen today?
Last night the foreign markets were down. London was down 0.81%, Paris was down 0.86% and Frankfurt was down 1.69%. China was down 0.35%, Japan was down 0.28% and Hang Sang was down 1.01%.
The Dow should open moderately lower as the 10-year is clearly over the psychological barrier of 3.0%. The dollar is also strengthening to a three-month high which may suggest American goods may not be as competitive abroad. The 10-year is off 6/32 to yield 3.03%.
