The stock market is rising Wednesday morning as bond yields head lower ahead of the release of the Fed minutes, helping to revive interest in
(AMZN),
(AAPL), and other tech stocks.
The
has ticked up 72.71 points, or 0.2%, while the
has advanced 0.3%, and the
has gained 0.4%. The 10-year Treasury yield has dipped 0.032 percentage point to 1.338% after dipping below 1.3% earlier this morning. .
That decline in the 10-year Treasury yield certainly has everyone’s attention. It was just a few months ago that the yield was near 1.75% and everyone was talking about it hitting 2%–or even higher. No longer. Now, the big question seems to be what the falling yield portends. Slowing growth? Risk off? Nothing at all? It’s certainly hard to know. But one thing is clear: Treasuries are suddenly in demand.
“The overnight price action confirmed Tuesday’s rally with an impressive 2.15x the normal trading volumes and half of the flows in the 10-year sector,” writes BMO’s Ian Lyngen. “This concentration of activity in the ‘benchmark of all benchmarks’ reflects a move that is about Treasuries as an asset class as opposed to any policy nuance in curve shape or reflation versus reopening optimism. Reading these particular tea leaves is further complicated by the fact the move hasn’t been the classic flight-to-quality triggered by a meaningful correction in risk assets that one might have anticipated given the magnitude of the decline in US rates.”
Not at all. While the drop in yields has caused investors to give up on the cyclical trade, it certainly has been good for big tech. Amazon.com hit an all-time high on Tuesday after languishing for nearly a year, while Apple looks not far behind. Amazon is up 0.8% in premarket trading, while Apple has advanced 0.8%.
That makes sense. If growth is slowing, investors want to own companies that can grow no matter what. And lower yields can make future cash flows worth more in the discounted cash-flow models that analysts use to value stocks. Until Treasury yields rise again, don’t expect that outperformance to change.
Here are five stocks on the move Wednesday:
(DIDI) has dropped 4.1% one day after shedding 20% after Chinese regulators ordered it deleted from that nation’s app stores. U.S. Sen. Marco Rubio was also calling out the company.
(AMC) has dropped 6.8% in premarket trading after dropping 3.9% on Tuesday. That sets it up for a fourth straight loss, which would be the longest losing streak since April.
(OAS) has gained 2.2% after getting upgraded to Outperform from Sector Perform at RBC Capital.
(SAM) has risen 3.3% after getting upgraded to Outperform from Neutral at Credit Suisse.
(NOVA) has risen 1.9% after getting upgraded to Strong Buy from Outperform at Raymond James.
(MAS) has dropped 1.1% after getting cut to Underweight from Neutral at JPMorgan.
Write to Ben Levisohn at ben.levisohn@barrons.com
