Fed Chair Jay Powell
spoke today and managed to invoke the “i” word: “inflation.” Even though he assured market participants that no interest rate hikes will be forthcoming anytime soon — least of all in the next FOMC meeting later this month — market indexes saw more sell-offs across the board: the Dow went 1.11% lower on the day, -346 points; the S&P 500 was -1.34%; the Nasdaq fell 274 points, or -2.11% and the Russell 2000 was off 2.79%.
For the tech-heavy Nasdaq, its now the worst three-day stretch in the last six months, and is down nearly 10% from its record high. It’s also the index’s third straight week of losses (with one more trading day left tomorrow), led downward by super-high valuation stocks like
Tesla
TSLA
, -4.9% today and -9% from a week ago. The general rotation from big tech names that had previously enjoyed huge run-ups in the second half of 2020 is playing out as a rather painful correction.
In Powell’s comments today, it wasn’t so much the obvious touch points he mentioned — the coming economic surge with first the stimulus bill and then the embers of the pandemic will provide a big boost to growth, and thereby inflation — as it was his matter-of-fact demeanor in delivering them. Investors seem to suddenly be faced with the inevitability of liquidity drying up, and valuations are now being recalibrated in earnest. The 10-year yield rose to nearly 1.55% before settling back down a tad.
Factory Orders
for January posted their ninth-straight up-month, posting 2.6% which was 50 basis points higher than expected, and well off the 1.6% initially posted for December. This is the highest monthly tally since June’s 6.5%. Factory orders had earlier established gains from the combined -24.5% from last March and April, led by extraordinary growth in commercial and defense aircraft — up 390% and 63%, respectively.
Fiscal Q1 results for chip-making giant
Broadcom
AVGO
were better than expected: $6.61 per share topped the $6.55 in the Zacks consensus and 25% higher year over year, while sales in the quarter grew to $6.66 billion from the $6.61 billion our analysts had been expecting, +14% year over year. Revenues for fiscal Q2 have been increased to $6.5 billion in what is typically a slower quarter. Broadcom also posted a 23% increase in Operating Profit for the quarter.
Shares are selling the news in the late-trading session, though the stock is still up nearly 180% from its March 2020 lows. The company has not posted an earnings miss in seven years — as far back as our chart goes with the company in its current configuration. Chip shortages industry-wide may limit upside in the coming quarter or two, which may be part of the reason Broadcom is 3% lower after its positive earnings release.
Questions or comments about this article and/or its author? Click here>>
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it’s predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce “the world’s first trillionaires,” but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks’ 3 Best Stocks to Play This Trend >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report