NASDAQ 100, Tesla and DWAC euphoria fades as Trump victory rally loses steam
Global markets retreat from post-election highs as surging US bond yields and inflation concerns dominate sentiment and as Trump's cabinet picks raise questions about US-China relations.
US stock markets retreat as bond yields surge
The initial euphoria following Trump's victory has given way to caution as US Treasury yields surge, prompting investors to reassess their positions. This shift in sentiment has led to so far slight declines across major indices with some stocks taking the brunt.
Technical trading signals indicate mounting pressure on key benchmarks. The S&P 500 has slipped below the psychological 6,000 level, while the Dow Jones has retreated beneath 44,000 while the NASDAQ 100 only dipped by 0.17% on Tuesday and thus remains above the 21,000 mark.
Market participants are particularly focused on today's US inflation reading, which has added another layer of uncertainty.
The Russell 2000, often seen as a barometer for domestic economic sentiment, has experienced a sharper decline of 1.77% as the 'Trump trade" momentum wanes. This suggests growing scepticism about the future impact of proposed policies.
US stock indices comparison 5-day candlestick chart
Cabinet speculation impacts market sentiment
Trump's potential cabinet appointments have drawn significant attention, with several Fox News personalities and political allies being considered for key positions. These choices could signal significant policy shifts.
Markets have responded to speculation about Peter Hegseth for defence secretary and Marco Rubio for secretary of state, reflecting uncertainty about future policy direction.
Notable appointments include Elon Musk and Vivek Ramaswamy to head a new Department of Government Efficiency, suggesting a focus on streamlining bureaucracy. This has implications for various market sectors.
The potential appointment of China hawks to key positions has particularly affected sentiment towards Chinese equities, with mainland indices struggling to maintain momentum as investors worry about a potential 60% tariff being imposed on some Chinese goods.
Technology sector feels the pressure
Tesla's share price has experienced a significant 6% decline, reflecting broader market concerns and uncertainty about Musk's potential government role. This has to be put in perspective, though, since the Tesla share price rallied by over 40% within a week and only filled in its Veterans Day price gap. This is normal market behaviour.
Tesla daily candlestick chart
A further slip towards the $300.00 for the Tesla share price may short-term be on the cards, especially if US Treasury yields continue to rise, but the long-term uptrend will technically remain in place as long as the early November low at $238.88 underpins.
Nonetheless, the share trading sector has seen increased volatility.
Digital World Acquisition Corp (DWAC), closely tied to Trump's media ventures, saw its shares drop by nearly 9%. This suggests investors are reassessing their positions in Trump-related investments, at least in the short-term.
Trading platform data shows increased activity in technology stocks, as traders adjust their positions in response to the changing political landscape.
These movements highlight the complex relationship between political developments and market performance, particularly in the technology sector.
Bond market implications
The reopening of the bond market has seen a notable rise in Treasury yields, reflecting changing expectations about fiscal policy and inflation. The online trading community is closely monitoring these developments.
US 10-year treasury yield daily candlestick chart
Market participants are bracing for the US consumer price index (CPI) reading, which could further influence yield movements. This has implications for both equity and fixed-income strategies.
The CFD trading markets have seen increased activity as traders position themselves for potential volatility.
Higher yields typically pressure growth stocks and could impact market dynamics in the coming weeks.
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