Mike Santoli’s market notes: Big Tech syncs up with long-term Treasuries, ARK Invest battleground

Published Wed, Feb 24 20211:30 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics Muted rerun of Tuesday's action: Bond yields pressure Big Growth stocks at the open, yields back off at 10 a.m., Nasdaq bid arrives, while the average stock continues to outdo the index and cyclically geared/high-beta stocks go vertical. The entire swirl remains an increasingly urgent repricing of assets for a sooner-rather-than-later unleashing of pent-up economic energy. It's not so much that Big Tech stocks suffer directly from higher bond yields. It's that the same investor priorities driving yields higher make them prefer financials, industrials and energy and using defensive mega-cap growth stocks as a source of funding. Which means in practice Big Tech trades in sync with long-term Treasuries, as this chart of QQQ vs TLT intraday shows. Bond prices get a lift, so do growth stocks. Meantime, no let-up in the cyclical stuff, to the point it's getting a bit extreme to the naked eye. Here's S & P High Beta (70% financials, industrials, energy and materials) vs S & P Low Volatility (50% staples and healthcare). The ARK Invest complex is still a battleground. Lots of folks shorting the ETFs, trying to game out daily flows and hunting for patterns in the favorite stocks. If inflows don't come back big it's a zero-sum deal, ARK has to sell one thing to defend/add to more preferred positions. Big outflows last night, wouldn't be surprised to see inflows return today. Both sides need to dig in for the long game here. Powell saying not a single thing that wasn't utterly predictable two days ago, but it serves as a reminder of the sweet spot investors perceive themselves to be in. Economy set to accelerate with perhaps another $1.9 trillion fiscal push, but the Fed anchored at max easy until things heat up a lot for a long period. The searing sector rotation is helping to keep investor attitudes in check, arguably, while suppressing index-wide volatility. Two quick downside gut checks in the benchmarks in four weeks can prevent runaway overconfidence for a while. You know the drill: First the Pink relief (Not Broken, Just Bent) and then if we just rip to new highs the Kelly Clarkson Effect swagger kicks in (What Doesn't Kill You Makes You Stronger). Won't take much to rebuild toward giddy sentiment extremes in that case. Credit is holding up fine. High-yield spreads undisturbed by the equity turbulence, though as noted investment-grade bonds slipping in price step for step with Treasuries. Not yet a major pressure point at these yield levels but it all in theory should cap equity valuations around current levels. Breadth has been strong all day, more than 2:1 up/down split. Equal-weight S & P up 1.4% and at a new record. These are not bearish inputs. VIX never built in much fear yesterday, with reason given the resilience and rotational action, and it's easing back to the low-20s again. Sticky here but not sending up a warning flare.

Traders on the floor of the New York Stock Exchange

Source: The New York Stock Exchange

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics

Muted rerun of Tuesday's action: Bond yields pressure Big Growth stocks at the open, yields back off at 10 a.m., Nasdaq bid arrives, while the average stock continues to outdo the index and cyclically geared/high-beta stocks go vertical.