It is interesting to note that the stock market was already giving back a lot of yesterday’s midday gains before the market closed...and before the earnings from several high profile tech companies. Don’t get us wrong, the decline over the last hour and a half of yesterday was not a disaster, but the S&P did give back about 45% of its gains by the close. We’d also note that the breadth on the S&P 500 went from almost 7 to 1 positive at 2:30 to just 2.4 to 1 positive at the close of trading.
The disappointing earnings reports out of those tech names (led by AAPL and AMZN) have the S&P futures trading down by about 30 points as we write...and the Nasdaq futures are down by more than 1%. However, the bond market is not reacting very much to this decline...which has been true all week...despite some pronounced weakness in the stock market. This does not surprise us very much. During the severe decline of the spring, bond yields dropped significantly in a “flight to safety” move. That made perfect sense...as people worried about how many companies might go out of business due to the global pandemic. This time around, people are worried about whether the results of the election...or the inability of Congress to pass a new fiscal plan...or further lockdowns in Europe & the U.S...will dampen economic and earnings growth. So the concerns are not quite as serious.
Let’s face it, the disappointing earnings we got from several tech companies last night is certainly not raising concerns about whether any of them will survive going forward. In fact, 99.9% of investors KNOW that all of these tech companies will THRIVE going forward. They are GREAT companies with GREAT futures. The only question right now is whether ...
