- Yields collapse in Europe on Tuesday as German 10-year goes negative.
- German Dax falls sharply again on Tuesday, down over 2.5%.
- Tensions remain high as talks break up between Ukraine and Russia.
Yields are making a massive move lower in Europe on Tuesday as the market moves to reprice interest rate hikes from central banks in the wake of the Russia-Ukraine conflict. The German 10-year is once again in negative yield territory as it collapses a massive 13 basis points on Tuesday. Usually, technology stocks would be buoyed by such a move, but not this time.
Nasdaq Stock News
We are now entering the worst-case scenario for stocks, especially technology stocks. Rocketing inflation is coupled with the probability of slowing growth. Europe could tip into recession next winter as it will struggle with crippling energy prices. The dreaded specter of stagflation then is hammering yields and equities. The flight to safety is certainly part of the problem as European bank stocks suffer from Russian exposure sensitivities.
The German Dax is now down nearly 3% again. US indices are relatively more insulated from the crisis both geographically and economically, but prolonged sanctions and higher energy prices will not help any sector. Food prices will rise, shipping costs will rise and prices of precious metals used increasingly in semiconductors and electric batteries will rise. Possibly only the defense sector stands to benefit in a prolonged conflict.
Nasdaq Stock Forecast
Relative Strength Index (RSI) remains well below 50 as the rally slows and strength fades. The Moving Average Convergence Divergence (MACD) is also strongly in negative territory. $317 remains massive support due to the old low from May and the huge volume at the level. Breaking that and the Nasdaq (QQQ) will look to target $300 pretty quickly in our view.
Nasdaq (QQQ) chart, daily
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