Nasdaq, S&P slide on wage inflation worries, Dow bucks trend

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The broader market was lower Thursday with Fed hike concerns and higher rates weighing.

The S&P 500 (SP500) -0.5% was testing support at the 200-day moving average of 3,940 again. The Nasdaq (COMP.IND) -0.7% also fell.

The Dow (INDU) +0.2% was higher due to a sharp pop from Salesforce (CRM) after bullish earnings.

Weekly initial jobless claims remained low, falling unexpectedly to 190K.

Q4 unit labor costs shot up to a rate of 3.2%. The forecast was for a decline to 1.6% from 2%.

"More evidence that the road to 2% #inflation will be long and bumpy," Schwab fixed income strategist Kathy Jones tweeted.

The 10-year yield (US10Y) rose 8 basis points to 4.08%, topping 4% yesterday for the first time since November. The 2-year yield (US2Y) rose 4 basis points to 4.93%, hitting a new post-2007 high yesterday.

The stubbornly strong labor market amid a jump in labor costs will embolden FOMC hawks. Markets are pricing in a 30% chance of a 50 basis point hike at the next meeting. Fed governor Chris Waller speaks this afternoon.

See the stocks making the biggest moves this morning.

Comments

[ex institutional listed derivatives analyst]

The problem with stats is that you make assumptions when you look at the numbers. The stats show that the jobs report is showing increased employment which is a cause for inflation but the reality is that the lower-paying jobs in areas like hospitality are replacing tech and life science jobs. Someone on SA should investigate this. The number looks good and will help companies like Amazon as people need to eat and buy essentials but won't help the economy as a whole as high-paying jobs are disappearing.

[adaret]

From slide to gains. A turnaround that has stymied some today.

[mizesa]

@adaret Look at the options that expire tomorrow.

[M Elan]

@adaret second and goal, nice stop

[PatienceDiscipline]

@mizesa what do you mean?

[SivBum]

vix now down 1.21% and spx is also down 0.18%, going irrationally in the same direction. crazy option plays again. For the record:

Today, 10:06 AM

VIX is unchanged at 20.58, +0.00% at 7:05AM.

Mania for extremely fast-twitch options are in today.

[MooneyMooney]

Is it time to sell and go cash but it’s also said don’t try to time the market, it’s the time in the market that matters for long term investors

[Ra's al Ghul]

possible rounded floor, on the Nasdaq? ..
www.tradingview.com/...
www.tradingview.com/...

[Ra's al Ghul]

for the eternal gamblers of the Apocalypse. . VIX in negative territory and close to piercing 20 points. . Let's remember that back in the pandemic we were with a VIX back in the 80s. . If the Nasdaq today respects the EMA200 in weekly compression. . Go closing the short positions. .

[User 50618719]

You'll probably disagree, but to me, the indexes look prime for a bounce.

[Maverick 2021]

ALGOs keep market valuations very high versus risk free return of 5%….

The risk free return will hit 6% this summer as the Fed rate tightening will continue….

Preserve Capital…..

[SivBum]

Three gorillas are in the china shop throwing their wide bodies at the displays:

1. Demographic paradigm shift as boomers are retiring, turning too old to work, bad health from Covid-19.
2. De-globalization with higher labor cost away from China to higher North American wages.
3. Back to the normalized fed rates of about 3% outside of recessions such as negative real rates during The Great Recession of 2007.

fred.stlouisfed.org/...

[SivBum]

VIX is unchanged at 20.58, +0.00% at 7:05AM.

Mania for extremely fast-twitch options are in today.

[Value Digger]

I have forecasted since late 2022 that heightened volatility is the new norm and the market will remain choppy in 2023 for another year in a row:

seekingalpha.com/...

Meanwhile, many investors who rode a "stocks only go up" rally for about a decade have now realized that fundamentals do matter.

Therefore, this is a stock picker's market. And again, fundamentals do matter.

[ESP equity research]

@Value Digger ;
Agreed. There are good values out there in the right sectors IMHO. I like some steel plays like X, TX, STLD, ZEUS - and HB stocks like BZH, MHO.

Need to look past the cycle - 3-5 years into the future...

[Value Digger]

@ESP equity research Actually, I advise the subscribers to my research to buy debt-free undiscovered names with rock-solid balance sheets, among other key positives.

[ESP equity research]

@Value Digger ;
Diggin for Value perhaps?

How about Debt-free, selling below NAV, super low PE's?

The plays: X, TX

[Amos Tuck]

Mohammed El-Erian is right.

The Fed fell behind a THIRD TIME when they only cut rates by 25bp at the last meeting.

Inflation has re-accelerated.

Now, the Fed needs to hike 50bp...and keep hiking.

Every time they prematurely slow the pace of hikes, the terminal rate ratchets higher.

This is a problem.

30-year fixed rate mortgages are about to burst through 7% again...and will likely hit 8% by summer.

The housing market is frozen...but houses need to fall almost 40% to maintain an equilibrium in monthly payments.

The Shiller P/E sits at 29X.
U.S. Market Cap to GDP sits at 155%.

Warning signs are flashing for stocks. (See: Grantham.)

[Sabermetrics]

@Amos Tuck
Wake up, guys. Inflation is running hot, you have to hedge it by buying equity, not avoiding it.

DISCLAIMER: All investment strategies involve risk of loss. Nothing contained in this publication should be construed as investment advice. The author is not responsible for the investment results of this publication. Readers are advised to do their own analysis.

[mizesa]

@Sabermetrics You can fight the Fed, not I. How did buying equities to fight inflation work out last year? Now shorting equities was a winner!!!

[Sabermetrics]

@mizesa
I think simply: you put in bond, it goes down. You hold cash, it is undermined by inflation. Other asset classes are no better.
While the government said inflation is 6.2%, it is a national inflation, not your personal inflation. While your personal inflation may be lower, in most cases national inflation is understated. And if your purchasing power is eroded by inflation, that is a problem. Get rich (maintain your purchasing power) or die tryin'.

DISCLAIMER: All investment strategies involve risk of loss. Nothing contained in this publication should be construed as investment advice. The author is not responsible for the investment results of this publication. Readers are advised to do their own analysis.

[techy46]

US 20 year deficit and spending boom is over, rates going to 5.50-6.25%.

[Finding Your Retirement]

@techy46 we just gave 2 billion to ukraine. biden has a 50B bill in congress. I don't think this spending boom is ever going to end but then again I'm a bit pessimistic

[techy46]

@Finding Your Retirement

Agree, Bidem and MSM keep cherry picking deficit dpwn statistics.

Biden's increased US Debt $7T over next 10 years, $50T+ by 2030.

This reeks of LBJ's Vietnam War era, drove US into 1980's 10% rates.

[Michink]

Considering the rate of the 10Y bond, the S&P should trade at the very most at 3,800. Market will go down in the next days until it reaches that level

[PatienceDiscipline]

@Michink didn't see you today's price action? it looks really bullish

[Michink]

@PatienceDiscipline We'll talk about it in a few weeks

[PatienceDiscipline]

@Michink I remember you said you sold off all of your AMD. Do you regret doing so? It's actually going back up now. Technical charts are pretty bullish.

[User 31614085]

kind of impressive the S&P is only down half a percent with Tesla down 8%...somebody might want to check to see if the plug to the index calculator is still plugged in... ;<)

[M Elan]

@MJL987 The captives are being told to anticipate The Pivot. The masters explain that the Fed can be ordered to print again in 2023.

[Real007]

Inflation's like super glue -- plus it can be a "self licking ice cream cone" or a recursive piece of software (calls itself) - for you computer scientists in the room. Case in point, Russian refined products (e.g. diesel) were just banned across Europe (and for good reason too) now they'll have to pay higher prices for refined products and that will (in itself) "fuel" inflation.

Our work shows a Fed Pivot (earliest) of Mid 2027. In the meantime, back at the ranch, equities are TOAST like TINA.

[Amos Tuck]

@Real007

Agreed.

[Rags0]

@Real007 You are either right about Fed Pivot of 2027 or equities TOAST ( If not wrong on both). Both cannot happen. For Fed to wait until 2027 to pivot, you are assuming that jobs are strong until then. Do you think people are going to have jobs or wage growth if equities keep going down? Ofcourse stock market is not economy but which company is going to pay 6% wage increase every year without layoffs when their stock is tanking?

[DayIdie]

@Real007 He’s going to make Volcker look like a nice guy.

[RedQueenRace]

Interesting times.

The 10-year yield has gapped up above 4% (4.07% at this time) but the 10-year is now in oversold territory.

The ES is trading at an SPX equivalent that is below the 200 dma pre-market. But what matters is the close. We could be seeing stop-flushing action that gets reversed but we won't know until EOD at the earliest.

[Niki Naza]

@RedQueenRace
You make it sound as if this one session makes or brakes the trend.

Wake up, we are still going down, no matter if markets close -1% or +1% or whatever.

[RedQueenRace]

@Niki Naza
You don't understand the post. Go back to sleep.

[M Elan]

@RedQueenRace won't know if the line held one more day? OK, I agree with that.

[language police]

Financial firms - especially holders of fixed-rate mortgages, auto loans, and credit card companies - are about to face some unpleasant music. Somewhat protected: high-margin fix-er-up retailers like Lowe's and AutoZone.

[Trader 611]

Inflation, it's only transitory!

[Tambo210]

100bps point rise. Short sharp blow.
Get it over and done with, rather anticipating 1 x 50bps and 2 x 25bps. End rate is still the same, just sooner.

[M Elan]

@Tambo210 there would be much weeping from the Wall Street crybabies (bring it on, let's flush "wealth effect" for good and forever. What an idiotic policy.)