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A Massive Rate Shock Sucks Stocks Sharply Lower on June 13, 2022

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6/13/22

STOCKS – AMD, NVDA

MACRO – SPY, 2-YR, FED FUNDS RATES

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Stocks fell sharply again as the bond market re-prices interest rates for the Fed. The market is not happy with the Fed’s current pace of hiking rates and is taking matters into its own hands. The 2-yr yield rose by 27 bps today, climbing to 3.34%. It reached as high as 3.41% at one point. Since Thursday, the 2-yr rate has been up more than 50 bps or two rate hikes in Fed terms.

The 2-yr rate went through resistance at 3.25% in a blink. With the Fed funds futures pricing in overnight rates rising to 4% by the middle of next year, a 2-yr climbing to 4.25% doesn’t seem all that impossible. I don’t remember if I mentioned that idea yesterday or not?!

2-Yr Rates

Anyway, the last time the 2-yr rate was this high was back in 2007, and there isn’t much in the way of technical resistance between the 2-yrs current rate and the 4.25% region.

S&P 500 (SPY)

At this point, I think there is a good chance that we will see 3,650 on the S&P 500 before not too long, maybe even tomorrow. There is only some small support, around 3,725, and after that, 3,650. Even if yields settle down tomorrow, I think with the big move in rates, the PE multiple of the index needs to compress more, putting further downward pressure on stocks. Additionally, 3,650 takes us back to the downtrend that started back in January.

Nvidia (NVDA)

Nvidia closed right on support at $156; with all those gaps to fill, it seems like it will not take much in a technical sense to get the stock moving lower towards $136. Who knows, it could drop to around $117 over the next few weeks.

AMD (AMD)

AMD looks bad; the stock has failed multiple times at its long-term downtrend. Additionally, the little uptrend it had formed was shattered today. The only thing holding this up right now is support at $85.50, which has been tested 2-times already. I doubt it will hold again. With $73.50, acting as the next spot for a potential support region.

Anyway, there are a lot of stocks like these two just sitting and testing support levels. My gut says that if these two break support, all the others will too, which means we will see another wave of selling.

-Mike

This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice.Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.