Business
Nervous game: Wall Street is preparing for another shaky week
A restless weekend has passed for the U.S. stock market, but particularly volatile trading last Friday tells only part of the drama of recent weeks: technology stocks, last-year stars, are falling, and bank and energy stocks are rising.
Why is this happening, and what can we expect next?
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Wall Street
Dudi Reznik
Monday, 08 March 2021, 00:00
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Looking at the top U.S. stock indices over the past trading week hides the big drama and volatile trading that characterized the technology stock sector. While the Dow Jones and P & S-500 indices recorded slight gains in the trading week summary, the technology sector recorded a close close 3% and completed a decline of more than 8% since the peak set on February 12. Moreover, the index also does not tell the whole story and hides particularly sharp price declines in some technology stocks over the past week, which brought to a peak the recent rotational trend From technology stocks to value stocks, such as banks and energy companies. The
past year has been phenomenal for technology stocks, which have risen more than 60% on average. During this period, the Dow Jones index rose by only 30% "only". The corona crisis has sharpened. And peaked the overperformance of growth stocks relative to value stocks
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Alertness and nervousness.
Wall Street (Photo: GettyImages, Spencer Platt)
Dudi Reznik (Photo: PR)
Expectations of a return to routine in the US have been rising recently, partly due to the continued rise in the number of vaccinated and declining morbidity, and against this background expectations of inflation have risen again, along with the assessment that the US Federal Reserve will have to respond. expands the past year. this policy was oxygen especially during price hikes over the past year, with an emphasis on sector technology stocks. at the same time, there has been a recent rise in yields on government bonds, which are an alternative to investing in shares.
these steps have significantly increased the nervousness in stock markets, with the main victims "Technology stocks, which led the price rises from the end of March 2020. For example, Tesla, one of the investors' favorites in 2020, fell more than 30% from the end of January. Last Friday was a good example of trading nervousness, when the NASDAQ index" During the trading day, K. decreased by more than 2%, but ended with an increase of 1.5%.
With the opening of the trading week tomorrow (Monday), trading is expected to continue to be volatile.
On the plus side, investors will take over the $ 1.9 trillion Biden administration assistance program over the weekend, while the rising trend in government bond yields may continue to weigh on stock market performance, with an emphasis on technology stocks.
At the center of this week's macro data will be the publication of the Consumer Price Index for February (Wednesday).
A higher-than-expected index could ignite a new wave of fears of an inflationary eruption and lead to rising volatility and further price declines.
All this leads to the conclusion that the US stock market, with an emphasis on the technology sector, is not currently the place for risk-averse investors.
Therefore, the solid investor is advised to wait for the moment as the exposure to US stocks increases. However, it should be remembered that over time, stocks yield the highest returns and therefore, an investor with a medium-long investment range - and especially less sensitive to daily volatility - can find at present Not a bad entry point for the US stock market, and especially for those tech stocks, which have recorded relatively sharp declines in recent weeks.
Dudi Reznik is Leumi Capital Markets' interest rate strategist
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