Markets unexpectedly reversed course on their view of a guaranteed interest rate cut by March 2024. Only last month in December, the media flooded the news with speculation of up to six interest rate cuts this year. Treasury bond yields fell into the low 4% range.
Yesterday, ETF investors holding the 10-year (IEF) and 30-year Treasury (TLT) did not expect yields to rise so quickly. The 10-year yield gained around 3.1% to around 4.1%, compared to its 3.25% - 5.0% 52-week range. Rising yields will threaten the magnificent seven stocks the most, should investors worry about valuations.
In pre-market trade, watch out for Microsoft (MSFT) and Advanced Micro Devices (AMD) to trade higher. Market confidence in the AI market continues to help their stock price. Nvidia (NVDA) is also likely to open at a new 52-week high. The U.S. government’s trade and export restrictions failed to stop Nvidia from selling compliant graphics processors to Chinese markets.
In the Chinese EV sector, NIO, Li Auto (LI), and XPeng (XPEV) need to bounce back to counter the increasingly worsening selling pressure. The European Union launched an investigation into China’s EV makers. The EU wants to protect its domestic EV market. This will severely cripple the export volumes for XPeng and Nio especially.
