In my post yesterday, I highlighted the 4200 support level for the S&P 500 and the risks if that was breached. Well, today as the tech sector melted down it dragged the S&P 500 index under the 4,200 support level.
Rising Treasury yields and political gridlock in D.C. dominate financial headlines, but it was GOOGL’s poor results that became one straw too many, and the index shed another 1.4%.
And significantly, soaring U.S. Treasury yields are further boosting the appeal of bonds over stocks, deepening an already painful equity selloff while threatening to weigh on equity performance over the long term.
If earnings growth is squeezed as expected there are many stocks which are currently significantly overvalued – so perhaps the real message here is that individual stock-picking is back baby, rather than playing the index. Plus, there is always the risk of course Central Banks panic and cut rates hard into a recession, something which they have form on doing.
So, in fractious markets sometimes watching from the sidelines is the best move, until things shake out. Remember October is often the worst month for stocks across the year!
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