Tech stocks enjoying some reprieve on Wednesday after taking another beating on the first trading day of the US week, taking the Nasdaq into correction territory.
The correction has been rapid and, arguably, coming given the extraordinary year they've had. Whether you're talking about the 83% rise from pandemic low in March to the peak a week ago or the more modest 27% rise from pre to post pandemic peaks, it really has been a remarkable year for tech.
The world has changed a lot in a very short period of time and tech has undoubtedly been best placed to reap the rewards but the big problem is valuing a sector like this in the midst of the pandemic. The world will not return to what it was in February and it won't continue as it is now. And the void in between these two realities is vast, which makes valuing these firms more difficult than ever.
Add to this the FOMO behaviour that accompanies anything that rises as rapidly as these stocks have, not to mention the "Nasdaq whale" which was revealed to be none other than Softbank this week and we're looking at a market that was covered in froth. At what point do these stocks start to represent value again? I can't imagine we're too far away from investors interests being piqued.
AstraZeneca/Oxford University setback shrugged off
The overnight news on the AstraZeneca/Oxford University vaccine could have caused a stir in these markets but investors appear to have taken it for what it currently is, a minor setback that may quickly resolved. Of course, that depends on the results of the investigation into the adverse reaction experienced by one volunteer.
Granted, these markets have been very reactive to vaccine developments over the months so it's perhaps surprising just how easily this has been shrugged off. That said, good news is more powerful than bad, particularly when there's so many vaccine candidates out there. And as I've already said, this is still only a temporary setback. If it turns out to be worse than that, maybe it will knock sentiment a little. Even AstraZeneca is only 1.45% lower.
Oil pares losses but facing resistance
Oil is paring losses after breaking through major support on Tuesday, extending losses to more than 15% over the last week or so. WTI has found some reprieve around $36, which roughly coincides with the April peak and June lows, so a notable prior area of support and resistance.
The rebound is running into immediate resistance around $37.50, the late June lows but $39 could be the key test. A move back above here takes us back into the prior range, while a rotation off these levels could signal more troubles ahead. Going into an uncertain period, both economically and politically, may not be ideal for crude prices.
Gold holding for now but USD a downside risk
Gold is edging lower again after finding some support around $1,900 yesterday. With the dollar breaking out the upper end of its range, the yellow metal could continue to come under pressure in the days and weeks ahead, meaning that $1,900 level looks very vulnerable.
As ever, that doesn't have any great impact on the longer term outlook for gold, which remains bullish, but in the near term we may be facing a period of $1,800-$1,900 trading, as opposed to what we've seen more recently.