To The Moon

US market fell on Fri, 11 Aug after US’s July 2023, Producer Price Index (PPI) report was out.

The hotter-than-expected July 2023, PPI :

• Pushed 10-year Treasury note higher by 8 basis points to 4.16%.

• Sank rate-sensitive Mega cap growth stocks.

When market closed for the week:

• DJIA: closed +0.3% higher but was off session highs. Health & Energy stocks led Tech stocks fell.

• S&P 500: came in at -0.1% at closing bell. The index is barely above its 50-day moving average.

• Nasdaq: fell by -0.6%. What was worse though, it broke support at its 50-day moving average.

US July 2023 Producer Price Index (PPI) Data.

• On a YoY basis, PPI was up 0.8%, above the 0.7% consensus.

• Prices (excluding food, energy and trader) moved up by 2.7% YoY, unchanged from previous month’s data.

• The Fed references both CPI and PPI closely.

• PPI is regarded as a leading indicator because it looks at pipeline costs for various products and services.

• Although CPI gets more media spotlight.

Slipping Tech Stocks

After enjoying a fantastic YTD run, Nasdaq’s technical stocks have seen its stock prices dipping.

In August alone, top tech stocks that have fallen so far:

• $Apple(AAPL)$ & $NVIDIA Corp(NVDA)$ are teetering on -10% fall in August 2023.

• $Microsoft(MSFT)$ is off by -4% despite its (a) artificial intelligence sizzle and (b) love affair with OpenAI — is off by 4% in August. Google (GOOG, GOOGL) has shed 2.1%.

• $Amazon.com(AMZN)$ was the only stock that has ended higher by +4%.

Coincidentally, the pullback in tech coincides with US 10-year Treasury yield rising from approx. 3.95% in late July to above 4.1% on Mon, 14 Aug 2023.

In early April, yields were around 3.3%, (for reference).

Good time to buy-in now?

Traditionally, the technology sector has been viewed as a cyclical sector.

That means it is not immune to the macro forces of an economic cycle.

Just that for the longest time, US encounters of (a) low to no inflation and (b) zero interest rate policy, have resulted in misconceived notion that “tech stocks are immune to conventional macro influence.

US inflation & interest rates are easing gradually towards some sort of normalization.

Investors struggle when faced with:

1. Inflation that may be cooling month after month, from its highest-level YoY.

2. Fed’s managed interest rate is not cooling down in tandem.

Time To Buy Tech Stocks?

• It is a known fact that August and September are lacklustre and uneventful trading months.

• This implies that there will be a lot of opportunity to buy your dream-stock/s.

• Especially if (a) inflation proves to be stickier than consensus believes and (b) interest rates remain at current “elevated” levels, as US economy will definitely be affected.

• Do you think now is the time to buy Tech stocks? OR

• Do you think Tech stocks will dip further; hence adopt a wait & see strategy?

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