Tech stocks dropping

Despite falling real yields

Chart of the Day

Falling real yields are normally good news for tech stocks, but that hasn’t been the case lately. The real 5-year yield fell by 3 bp yesterday yet the S&P 500 tech index fell by 2.5% and the Nasdaq the same . Many are blaming big unwinds from funds that had invested heavily in Covid-winners and other narrative stocks that had done very well in 2020. For instance, some of the big losers yesterday were in the EV market, where Tesla was down 6% and Workhorse a hefty 15%.

Macro

In April, consumer price inflation in China rose to 0.9%, while producer inflation increased to 6.8%.

In Norway, core inflation decreased to 2.0% in April, taking it back in line with the central bank’s target.

UK house price inflation according to Halifax accelerated to 8.3% in April. Realtors' expectations point to weaker price growth ahead.

Markets

The weak Norwegian inflation data weighed on the NOK, which dropped 0.5% against the USD. The stand-out performer was the GBP, which rose by more than 1% against the USD.

The CAD has pulled away from the other commodity currencies, despite little movement in the oil market. It has been doing much better with vaccinations lately.

Real US yields have moved lower in the past week: -15bp for the 5-year, -10bp for the 10-year.

Both near-term and long-term inflation expectations have been rising. The 5-year inflation swap has increased by 9 bp in the past week and the 5-yr/5-yr has increased by 12 bp.

Watch out though, as there were some signs of weakness in commodity markets yesterday.

Despite all the negative talk, the S&P 500 tech sector is still only down slightly in the past week.

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