Interest Rates Are Once Again Influencing Market Swings

In his Daily Market Notes report to investors, Louis Navellier wrote:

A Chill Through The Tech Sector

Tech is leading the market lower again, the Dow shaking it off early, and bonds are flat.

The news that China has asked government workers to not bring their Apple iPhones to work has put a chill through the tech sector. Apple (NASDAQ:AAPL) stock is down 7.2% since the news started circulating. Suppliers to Apple are taking heat as well.

The story is China is concerned about security which is clearly a retribution of US limits on Chinese technology for the same reason. Given how many US companies have material business in China, an escalation of a trade war could have serious consequences, but Apple’s massive size would dwarf the impact of most other players, and for now, it is very technology-oriented. It’s unlikely that Starbucks (NASDAQ:SBUX) could get swept up in the same way.

Interest Rates Swing The Market

Swinging the market once again are interest rates, where the 10yr spiked early to 4.31%, bringing fears of the mid-August highs, and low for stocks, after dipping overnight, but after the first hour and a half of trading had dropped back to 4.28%, after closing at 4.29% yesterday. The 2yr did much the same, gapping above 5.03%, and then down to 4.99% below yesterday’s 5.02%  These swings pushed the US dollar index around, running up to 105.1 and then pulling back and gold swung from gains to losses as well.

The one steady level is crude oil which moved little and is where it was yesterday; $87.50, and natural gas is higher.

Part of the volatility comes from job data, where initial jobless claims, expected to rise modestly, fell to the lowest since March, as did continuing claims. Unit labor costs, which have been falling, also rose. These labor trends were the big factor in the interest rate swings, as it’s definitely a focus of the Fed. On the bright side, the strength in labor is supportive of the soft landing outlook.

Buying Opportunity

As the day moves on the indexes are drifting higher and interest rates lower, with defensive sectors the strongest on the day. With the S&P 500 still up over 16% YTD and the NASDAQ +32%, some downward volatility is inevitable, especially in a traditionally seasonally weak month. It is likely that in the 4th quarter, we’ll look back on any major pullbacks we’ll be seeing in the weeks ahead as buying opportunities if the soft landing forecasts hold.    

Coffee Beans: Metalhead

A music-loving dog was returned to her family after escaping from her home and sneaking into a Metallica concert in California. The owners said the dog is used to loud music being played in the house. Source: UPI. See the full story here.

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