Bear market awaits tech stocks, with Tesla at the center, if this selloff continues, strategist warns

Bear market awaits tech stocks, with Tesla at the center, if this selloff continues, strategist warns
Bear market awaits tech stocks with Tesla at the center



Stock futures are pointing to some losses on the last full trading day — albeit likely a thin one — before the Thanksgiving feasting begins. Investors will also wade through a mountain of data on Wednesday. Recent stock losses have raised more doubts about a Santa rally, for some. Keep an eye on the 30-year Treasury yield
TMUBMUSD30Y,
2.009%,
advises Jeffrey Halley, senior market analyst at Oanda.
“Until long-dated U.S. yields start reversing their recent gains, and the author has long believed that is not a given, we shouldn’t expect an end to U.S. Dollar strength, nor should we be getting excited about equity markets for the rest of this month and possibly into Christmas,” he told clients in a note. Rising yields as investors know, are painful for tech stocks. “If interest rates rise faster than future growth expectations, then the net effect is negative on the present value and more so for growth stocks as they have a higher duration,” Saxo Bank’s head of equity, Peter Garnry, explained to clients in a note to clients on Tuesday. Garnry provides our call of the day as he uses a bit of recent history to make a grim forecast about what a renewed rise in yields could do to tech stocks. “We saw downside beta (higher sensitivity) in all of our growth equity baskets [on Monday] with the gaming basket down 2.3% and the worst performers being the E-commerce and Crypto & Blockchain baskets, down 4.2% and 5.1% respectively. This tells you a lot about the sensitivity and given the drawdown in technology stocks back in March, we could easily experience a 15% to 20% drawdown in technology stocks,” he said. An asset is commonly defined as entering a bear market when it declines by at least 20% from its peak. Garnry said highs reached earlier this year for the U.S. 10-year yield
TMUBMUSD10Y,
1.659%
— a 52-week high of 1.749% was reached Mar. 31 — are key to watch for a “breakout and a new trading environment. And one popular stock could be at the center of this, he said. “With all the options activity in Tesla dwarfing the combined options activity in FTSE 100 constituents, we believe Tesla will be at the center of the next risk-off move in technology,” he added.

Bloomberg/Saxo Bank

Tesla shares up 57% year-to-date, even as CEO Elon Musk keeps selling. He recently dumped another 934,000 shares for roughly $1.05 billion, bringing his total up to $9.85 billion since early November. Read: Cathie Wood’s ARK sold Tesla to buy Zoom after earnings Have a safe and happy Thanksgiving, and this column will be back Friday.

The buzz On the traditional day-before-Thanksgiving data dump, weekly initial jobless claims, the second estimate of Q3 gross domestic product, October’s personal income and personal spending, new-home sales, and the preliminary October durable goods and core capital goods orders data are all ahead. Also, the minutes from the latest Federal Reserve meeting are coming later. Overnight, the Reserve Bank of New Zealand raised its cash rate. The personal-computer boom is apparently still going strong, with HP
HPQ,
+0.81%
and Dell
DELL,
-0.83%
shares climbing after each reported strong sales. On the retail front, retailer Gap
GPS,
-1.80%
missed guidance due to “significant” supply-chain issues, while Nordstrom
JWN,
-1.21%
reported mixed results. Shares of both are tumbling. Longeveron
LGVN,
-38.94%,
a little-known biopharma, is garnering attention from the short-squeeze crowd, but they’ve seen this rodeo before and are wary. France’s fifth COVID-19 wave is spreading “lightning fast,” warn officials from one country of many in Europe that is struggling to get outbreaks under control. In the second Thanksgiving since the pandemic began, disease experts are closely watching hot spots in the chilly Upper Midwest. And the U.S. will soon require all border crossers to be vaccinated.

Deutsche Bank, Haver Analytics, Johns Hopkins University. Note: Reflects confirmed cases, which can be affected by varying levels of testing in each country.

Binance

Sweden elects its first-ever female prime minister, Magdalena Andersson.The markets

Stock futures
ES00,
-0.28%

YM00,
-0.32%

NQ00,
-0.34%
are softer, with bond yields
TMUBMUSD10Y,
1.659%
hovering at elevated levels and the dollar
DXY,
+0.19%
rising. Oil prices
CL00,
+0.25%

NQ00,
-0.34%
continue to rise after Tuesday’s well-telegraphed U.S. tapping of strategic crude reserves, as analysts see demand in the driver’s seat. Gold
GC00,
+0.19%
is also higher. And the Turkish lira
USDTRY,
-4.69%
is clawing back some ground after a brutal 10% tumble this week against the dollar.Random reads NASA sends spacecraft into orbit to smash into an asteroid, “Armageddon” style. An Albert Einstein manuscript, detailing the great mind at work over one of his greatest scientific breakthroughs, sold for $11 million at auction. Apart from the inflation buzzkill, there just isn’t enough booze for Thanksgiving this year. Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern. Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.



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