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Tech Stocks: Why Sell Them When You Can Buy Them?

by SuperiorInvest

Forget dovish expectations from the Federal Reserve (Fed), which should be lowered because the US economy is too strong to demand a rate cut from the Fed as early as March. Let’s forget that strong US economic data is not good news for the market. And forget about the fact that the rally in tech stocks should moderate, to allow the rest of the market to catch up to the Magnificent 7. Because that’s not happening. hit a new ATH yesterday, even though the latest US data showed initial jobless claims fell more than expected to the lowest level in more than a year, mortgage rates fell after a two-year increase weeks and the housing data was better than expected. , also.

On the bond front, the TIP auction saw strong demand and closed with a yield of 1.8%, up from more than 2% in the two previous auctions, suggesting investors continue to see potentially high inflation. , while betting that the Federal Reserve should start cutting rates in the near future. few moths. Another paradox.

One weak point is the American manufacturing sector. The weaker-than-expected Philadelphia Fed manufacturing index was further evidence that U.S. manufacturing remains weak. But who cares; American consumers spend and that keeps the American economy robust. The Atlanta Fed’s GDPNow forecast predicts 2.4% growth for the fourth quarter in the US.

The yield held steady below 4.40%, while the 10-year yield advanced to 4.16%. There is a stronger case for the 10-year US bond yield to outperform the 2-year yield: the Federal Reserve has trimmed bets and strong economic data supports an end to yield inversion.

In the case of stocks, a series of better-than-expected US data could have caused a further sell-off in US stocks, but that was not the case. And higher US yields could have led to a bigger sell-off in stocks, but that wasn’t the case.

Taiwan Semiconductor Manufacturing (NYSE 🙂), the main chipmaker for Apple (NASDAQ 🙂 and Nvidia (NASDAQ 🙂), rose nearly 10% yesterday after the company said it expects to return to solid growth this quarter. Nvidia hit a new record. Reflation trading is not happening; long-term technology is the busiest trade of the moment. Nasdaq 100 net long positions are at the highest levels in almost two years. Extended long positioning makes stocks Nasdaq stocks may be vulnerable to a sell-off, but weakening Fed expectations and strong demand for AI should keep the tech space well-funded.

in the foreign exchange market

Consolidates gains near its 200-DMA. Fundamentals and technicals are in a comfortable place for an extension of the recent bounce. It is range-bound between its 50- and 200-day DMA, near the boundary of the main 38.2% retracement in the October-January rally, which should distinguish between a continuation of the positive trend or a bearish mid-term reversal. term. I think the latter is more likely.

Gains continue to extend above the 148 level, boosted by the latest inflation data from Japan which showed inflation fell to a 17-month low of 2.6% in December from 2.8% printed a month earlier, and core inflation fell to a level of 18%. monthly minimum of 2.3%. The industry index of tertiary activity also fell unexpectedly in November. Weak economic data, combined with the post-New Year quake, encourage investors to trim bets on Bank of Japan (BoJ) normalization and push USD/JPY higher, along with broad-based strength. The Bank of Japan will meet next week and will surely reject bets on normalization. However, at current levels, USD/JPY is subject to verbal intervention from the BoJ to cool selling pressure. Therefore, buying USD/JPY at current levels is risky.

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