Tech stocks shrug off higher real yields

Tech strength means US equities pulling away again

Chart of the Day

It was another record high for the Nasdaq yesterday, although the index only rose by 0.3%. The strength of tech stocks has stood in contrast to the rise in real interest rates - the US real 5-year yield has increased by over 25 bp since its recent low of -2% in July. That is perhaps because investors are now more focused on the earnings of those companies, which generally outperformed expectations in the last set of announcements.

Macro

US new home sales fell to 676,000 annualized in June, the lowest since the peak of the pandemic.

The Richmond Fed manufacturing index fell to 9.0 in August, a negative sign for the ISM manufacturing index.

The nationwide services index may also have peaked based on the Richmond Fed services index.

Markets

The US indices have reached new record highs, whereas the indices elsewhere have not been as strong.

The recent strength of the S&P 500 has also been down to the tech sectors (Amazon is classed as consumer discretionary).

A rebound in China has helped the EM equity index pick up, at least a bit.

Brazil’s relative performance has been even weaker than that of the Shanghai A share.

The US yield curves have remained relatively flat in the past month, as fears about the Delta variant continue to simmer in the background and traders keep an eye on a potential announcement from the Fed at Jackson Hole this week.

Cryptos have rebounded strongly after the recent sell-off.

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