It is getting really ugly.  Bloomberg writes technology and mega capitalized issues are falling at the fastest pace since the bust of 2000.  Over half of the NASDAQ members are down at least 50% from their highs.  Piper Sandler states that over 52% of S & P 500 stocks are trading below where they were in February 2020.  The infamous ARK Innovation ETF is broaching its lowest close since the March 2020 rout, retracing all its pandemic inspired exponential gains.

Unfortunately for growth investors, growth stocks remain pricey especially when compared with value.  Bloomberg writes growth is currently trading at 22 times forward earnings versus 12 times for their value counterparts, double the 25-year average.

Future earnings expectations put growth stocks directly in the path of inflation that erodes the value of future revenue and earnings.  FAANG is trading at 45x future earnings as compared to 16.6x for the S& P 500.

Yesterday’s PPI did little to assuage inflationary angst.  The data indicated that inflationary pressures will not abate in the intermediate term and the probability of falling to the Fed’s 2% speed limit in the foreseeable future as extremely remote.

One thing to realize about a selloff…you will not know it is over until long after it ends.  However, this does not keep people from trying to pick a bottom.  Perhaps the only two concrete statements to make is that markets can fall (or rise) much further than anyone expects, and fear is more powerful than greed.

Commenting on yesterday’s market activity, the volatility was intense.  The S & P was down as much as 1.9%, broaching a 20% YTD decline but rebounded to close almost unchanged.  Bloomberg writes the S & P 500 has plunged 20% annually fourteen times in the last 95 years, the definition of a bear market.

Barring a significant rally today, the S & P 500 will close lower for the sixth consecutive week, something it has not done since 2011 according to Bloomberg.

The volatility was even more intense in the NASDAQ as it as posting losses greater than 3% to also close unchanged.  Year to date this index is down 27.3% and almost 30% from its apex.

The catalyst for the late day rebound was Fed officials stating that the Fed only intends increasing the overnight rate by 0.5% in June and July.  There was rising speculation of 0.75% increases.

What will happen today?

Last night the foreign markets were up.  London was up 1.56%, Paris up 1.57% and Frankfurt up 1.38%.  China was up0.96%, Japan up 2.64%  up 2.67%.nd Hang Seng

Dow and NASDAQ futures are up about 0.75% and 1.25% as rate hike fears ease.  The 10-year is off 15/32 to yield 2.91%.


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