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Stocks Drop On February 7 As Real Rates Grind Higher

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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2/7/2022

STOCKS – XOM, SQ, LCID

MACRO – SPY, TIP

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Stocks finished the day lower, with the S&P 500 falling by almost 40 bps. The declines came in the final hour after a pretty flat day. The S&P 500 again tested the downtrend and failed to break above it. But until it can break 4,450, we have to weigh the risk that the downtrend breaks. However, given the grind-up in rates, I think it is much more likely that the index breaks 4,450 and heads back to the January lows, if not further.

Rates

As I noted in today’s midday write-up and podcast for members, the outlook for stocks is less favorable today, and as long as rates continue to grind higher, it will be difficult for stocks to see gains. Despite nominal rates being relatively quiet today, TIP rates did push a bit higher. (The first two weeks are free to try – RTM- Waiting For Midweek)

The 5-Yr TIP closed higher by one bps to -93 bps from -94 bps on Friday. The inverted NASDAQ chart below shows that the index has not kept up with the rising real rates recently, and so the NASDAQ probably needs to take another leg lower to catch up to the recent rise in those real rates. In fact, with real yields making new highs, it would imply that the NASDAQ should be making new lows.

Lucid (LCID)

Lucid shares have fallen dramatically, and based on the chart, it looks like it may be about to make another big move lower. It sits right on support around 26.80; once that breaks, it is probably heading straight to $24.

Square (SQ)

It looks like Square moved up just enough last week to get out of overbought conditions so that the stock can now break lower and push to $83.

Exxon (XOM)

In a write-up today, I noted that Exxon’s run might be coming to an end, along with oil. It is available for members of RTM. (First Two Weeks Are Free to Try – RTM Exclusive: Exxon’s Surging Stock May Fall Along With Oil)

Have a good one

Mike

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