3 min read
Tech bounced. Almost nothing else did.
The Nasdaq rose 1.1% on Monday, but only three of eleven sectors finished higher. Home builders are the gloomiest since 2012.
The Close A good day if you owned tech, and a soft one for almost everyone else. The S&P 500 rose 0.4% to 7,691. The Nasdaq gained 291 points, or 1.1%, to 26,431. The Dow slipped 36 points, or 0.1%. Small companies barely moved. The Russell 2000 rose 0.3%. Stocks also closed well below their best levels of the day.
The stocks that fell hardest last week bounced first. Western Digital rose 6.1% and Sandisk 5.5%, as the memory and storage makers led a chip rebound. Palantir gained 4.4% after losing 7.2% on Friday. Amazon jumped 5.0% after Morgan Stanley named it a top pick. Datadog rose 5.4% on an upgrade from Bernstein. Tesla added 3.8% two days before it reports. The losers were the stocks that hate higher rates. Utilities fell 2.0%, the worst sector of the day. NRG Energy lost 4.2% and Constellation Energy 3.0%. D.R. Horton fell 2.9% as home builder confidence sank. Ameriprise lost 4.1% after Bank of America cut its rating. Mosaic, the fertilizer maker, fell 4.8%, the worst in the S&P. What The Market Is Pricing In Here's the part the headline numbers hide. The S&P rose, but most stocks outside tech fell. Eight of the eleven sectors closed lower, and the Dow finished in the red. On Wall Street they call this breadth: how many stocks join a move. A rally with good breadth lifts most boats. A rally with poor breadth rests on a few big names, and Monday leaned on tech, plus Amazon and Tesla. The reason was yields. The ten-year rose to 5.14%, and U.S. oil climbed again after Yemen's Houthi rebels claimed attacks on Saudi targets. Higher yields hurt any business that borrows a lot or competes with bonds for income investors. That's utilities, real estate and housing. Housing got the worst news. The home builders' confidence index fell to 29, below the 31 economists expected. That's the lowest reading since June 2012, when the housing market was still climbing out of the crash.
I've seen this before. In 1994, the Fed raised rates again and again, and mortgage rates jumped from about 7% to over 9% within the year. Home sales cooled, but the economy kept growing and avoided a recession. That's the hopeful version: housing slows and the rest holds up. But the tech bounce still needs proof. Netflix reports tonight, and Big Tech follows on Wednesday. What's Next Three things I'm watching today and this week: 01 Housing Starts The government's report on housing starts and building permits comes out today, Tuesday, October 20, at 8:30 a.m. Eastern. Economists expect about 1.31 million starts. After the builders' gloomy survey, a weak number would confirm that higher rates are slowing construction. 02 Netflix Netflix reports today, Tuesday, October 20, after the close. The stock fell 2.9% on Friday after a shake-up in its content team. Investors want subscriber growth and a clear plan. 03 Big Tech Wednesday Tesla, Meta, Lam Research, Texas Instruments and IBM all report Wednesday, October 21, after the close. Monday's bounce was a bet that AI spending pays off. These are the first real answers. Tech bounced, but the rest of the market didn't follow. Higher yields are still in charge.
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