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A bear market awaits tech stocks, with Tesla at the center, if this selloff continues, strategist warns

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Stock futures are pointing to some losses on the last full trading day — albeit likely a thin one — before the Thanksgiving feasting begins. Investors will also wade through a mountain of data on Wednesday.

Recent stock losses have raised more doubts about a Santa rally, for some. Keep an eye on the 30-year Treasury yield
advises Jeffrey Halley, senior market analyst at Oanda.

“Until long-dated U.S. yields start reversing their recent gains, and the author has long believed that is not a given, we shouldn’t expect an end to U.S. Dollar strength, nor should we be getting excited about equity markets for the rest of this month and possibly into Christmas,” he told clients in a note.

Rising yields as investors know, are painful for tech stocks. “If interest rates rise faster than future growth expectations, then the net effect is negative on the present value and more so for growth stocks as they have a higher duration,” Saxo Bank’s head of equity, Peter Garnry, explained to clients in a note to clients on Tuesday.

Garnry provides our call of the day as he uses a bit of recent history to make a grim forecast about what a renewed rise in yields could do to tech stocks.

“We saw downside beta (higher sensitivity) in all of our growth equity baskets [on Monday] with the gaming basket down 2.3% and the worst performers being the E-commerce and Crypto & Blockchain baskets, down 4.2% and 5.1% respectively. This tells you a lot about the sensitivity and given the drawdown in technology stocks back in March, we could easily experience a 15% to 20% drawdown in technology stocks,” he said. An asset is commonly defined as entering a bear market when it declines by at least 20% from its peak.

Garnry said highs reached earlier this year for the U.S. 10-year yield
— a 52-week high of 1.749% was reached Mar. 31 — are key to watch for a “breakout and a new trading environment.

And one popular stock could be at the center of this, he said. “With all the options activity in Tesla dwarfing the combined options activity in FTSE 100 constituents, we believe Tesla will be at the center of the next risk-off move in technology,” he added.

Bloomberg/Saxo Bank

Tesla shares up 57% year-to-date, even as CEO Elon Musk keeps selling. He recently dumped another 934,000 shares for roughly $1.05 billion, bringing his total up to $9.85 billion since early November.

Read: Cathie Wood’s ARK sold Tesla to buy Zoom after earnings

Garnry is advising investors “improve the balance between growth and value stocks,” to offset any potential tech losses.

Have a safe and happy Thanksgiving, and this column will be back Friday.

The buzz

On the traditional day-before-Thanksgiving data dump, weekly initial jobless claims came in at the lowest since 1969, while the second estimate of Q3 gross domestic product showed a slightly revised up pace of growth of 2.1%, while durable goods fell again, and the U.S. trade deficit in goods narrowed sharply. Still to come are personal income and spending data, new home sale and the final University of Michigan consumer sentiment index for November.

Also, the minutes from the latest Federal Reserve meeting are coming later. Overnight, the Reserve Bank of New Zealand raised its cash rate.

Deere shares
are rising after the construction equipment company reported profit and sales above expectations.

The personal-computer boom is apparently still going strong, with HP
and Dell
shares climbing after each reported strong sales.

On the retail front, retailer Gap
missed guidance due to “significant” supply-chain issues, while Nordstrom
reported mixed results. Shares of both are tumbling.

a little-known biopharma, is garnering attention from the short-squeeze crowd, but they’ve seen this rodeo before and are wary.

France’s fifth COVID-19 wave is spreading “lightning fast,” warn officials from one country of many in Europe that is struggling to get outbreaks under control. In the second Thanksgiving since the pandemic began, disease experts are closely watching hot spots in the chilly Upper Midwest. And the U.S. will soon require all border crossers to be vaccinated.

Deutsche Bank, Haver Analytics, Johns Hopkins University. Note: Reflects confirmed cases, which can be affected by varying levels of testing in each country.

Sweden elects its first-ever female prime minister, Magdalena Andersson.

The markets

Stock futures


are under pressure, with bond yields
staying elevated and the dollar
up. Oil prices

continue to rise after Tuesday’s well-telegraphed U.S. tapping of strategic crude reserves, as analysts see demand in the driver’s seat. Gold
is also higher. And the Turkish lira
is clawing back some ground after a brutal 10% tumble this week against the dollar.

Random reads

NASA sends spacecraft into orbit to smash into an asteroid, “Armageddon” style.

An Albert Einstein manuscript, detailing the great mind at work, sold for $11 million at auction.

Apart from the inflation buzzkill, there just isn’t enough booze for Thanksgiving this year.

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