🤼The Mysterious Performance

It isn’t intuitive that tech stocks rose sharply even as the yield was also rising in the session. However, while the 10-year Treasury yield hit 1.53%, Nasdaq had a remarkable comeback and climbed 1.6%. This dynamic is interesting as we would have expected the index to tumble.

It needs not to be ironic. First, tech stocks price tend to reflect the market expectation on the bond market. We see buyers scooping up shares after Monday’s fall hit a level somewhat similar to the July sell-off when the index hit a bottom of 14,274.

Second, such buying behaviour is also linked to investors expectations for the yield ahead. As of now, investors contend that the recent spike in bond yield may stabilise, and we could see the yield ranges around 1.46% to 1.54%. However, convincingly, a break above this level may bring us back to the 2021 high at 1.75%.

Pika World continues to monitor the yield movement as we solidify our gains for the year.

🚘EV Sector: Lordstown Motors

Lordstown Motors seems to be struggling lately and further crashed after it was downgraded to sell by Morgan Stanley from $8 to $2, which was a big hit. In addition, the planned sales of its Ohio manufacturing facility for $230 million in cash is way less than the 20% value of the plant.

The sale is primarily attributed to raising cash to introduce EV truck- Endurance into the market. Limited production is on the move in late 2021. However, the cash balance has been burning, and investors are concerned about the need to raise funds as it scales up production.

Pika World remains cautious about the company as it had cut guidance before for its 2021 vehicle production.

🎙Facebook: Under Stress but Still a Buy

Several damaging reports from WSJ had dampened investors’ appetite for its stocks. In addition, there have been concerns about its advertising businesses, significantly worsened in a choppy trading environment for technology stocks as inflation pushes interest rate expectations to rise.

For one, the social impact of Facebook on users is under critical scrutiny as people turn their attention to the merits and weaknesses of social media. While the stock continues to outperform in the long term, there is growing concern about how negative headlines weigh its prospect.

As a whole, investors seem to place limited risk to its current business model, particularly its advertising challenges and privacy crisis with Apple’s change in their iOS. Pika World has not initiated any stock position, but Facebook has a record of surprising negative sentiments with robust performance.

📮What’s on the Menu Today?

At 8.15 pm, we will have the ADP Non-Farm Payroll, which we expect to rise from 374K to 428K.

10.30 pm brings us to Crude Oil Inventories which we expect a further drawdown of 0.300M.

We will welcome FOMC Member Bostic to speak at 11.30 pm, which will be yet another possible insight on the economic health prospect in the US.

It is 6 October, Wednesday, at 7.52 am in Singapore and 7.52 pm in New York. Pika World wishes everyone a mooNATic week ahead!