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Nasdaq Rises Amid Falling Rates, and Tech Stocks Benefit from Lower Borrowing Costs

By:JJ Kinahan

Market performance is mixed, but the VIX indicates only a low level of fear among investors

  • Falling rates are driving Nasdaq gains and benefiting tech. Meanwhile, gold and oil prices are experiencing volatility.
  • The market is seeing mixed performance—tech stocks are surging while the VIX indicates a lack of fear among investors.
  • Activist nuns are suing Smith & Wesson. Earnings reports from GameStop and Lululemon will precede the jobs report.

Markets were mixed yesterday. The S&P 500 declined by 0.1%, while the Nasdaq saw a 0.3% gain. The Nasdaq's strength was because of falling interest rates, benefiting tech and growth firms that rely heavily on borrowing, leading to reduced borrowing costs.

Continued decline in yields contributed to lower costs, with the benchmark 10-year note rate dropping to 4.17%, marking its lowest level since August's end. The fall was triggered by the latest job openings and labor turnover survey (JOLTS), highlighting the lowest number of job openings since March 2021, possibly signaling trends for the upcoming jobs report on Friday.

Gold retreats and oil continues to decline

Falling rates drove recent gains in gold prices, although the metal retreated by 0.3% to $2,036 per ounce. Meanwhile, oil prices sustained their downward trajectory, with crude oil futures closing at $72.32 per barrel and further declining by 1% in premarket trading. This slump, the lowest oil prices have seen since mid-summer, contributed to a 6% drop in gas prices, averaging $3.21 per gallon according to AAA.

The market spotlight continued on the "magnificent seven," driving this year's gains. Six of these seven companies saw positive movemen t yesterday. Apple (AAPL) and Nvidia (NVDA) notably surged around 2%, while CVS Health (CVS)soared nearly 4% after announcing a simplified drug prescription pricing model. Additionally, the aviation industry, per the International Air Transport Association, anticipates record-breaking revenues, projecting profits exceeding $23 billion.

VIX reflects lack of fear

Amid these market movements, overall market volatility, measured by the VIX (The Chicago Board Options Exchange volatility index), stands at 12.85, indicating minimal investor fear. This low volatility, alongside rising stock prices, coincides with a surge in crypto prices, specifically Bitcoin trading over $44,000.

In other news, an activist group of nuns filed a lawsuit against gun manufacturer Smith & Wesson, aiming to pressure the company to alter its marketing of AR-15 rifles. Despite owning around 1,000 shares, the nuns' legal action aims to influence the company's governance.

Looking ahead, investors await economic data and earnings releases, including the GameStop (GME) earnings announcement after today's close and the Lululemon (LULU) report scheduled for tomorrow evening. These precede Friday's crucial jobs report, offering insight into potential monetary policy shifts in 2024. As always, sticking to established investing plans and long-term objectives is advisable.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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