Kayode Omotosho
3 min read
What Happened?
A number of stocks fell in the afternoon session after the major indices pulled back and tech-oriented equities fell as the Bureau of Labor Statistics reported a hotter-than-expected September inflation print, pushing Treasury yields higher.
As detailed by the Bureau of Labor Statistics, the consumer price index rose 3.7% year-over-year in September, topping the 3.6% estimate from economists polled by Dow Jones. According to CNBC, core inflation—which excludes volatile food and energy costs—climbed 2.6% annually against expectations of 2.5%. Following the print, CNBC market data showed the 10-year Treasury yield climbed over six basis points to 5.278%, while the 30-year yield advanced past 5.59%. According to market commentators, rising yields intensify pressure on equity valuations as third-quarter corporate earnings get underway.
In remarks carried by CNBC, Franklin Templeton Institute head investment strategist Jeff Schulze noted that pressure across the long end of the curve acts as a severe valuation headwind for risk assets. Financial analysts explain that higher benchmark yields mechanically elevate the discount rate applied to corporate earnings, compressing the multiples investors are willing to pay for equities. Ultimately, CNBC noted that when sticky inflation dampens expectations for monetary easing, the repricing falls heaviest on high-multiple growth and gig-economy sectors whose projected cash flows sit furthest in the future.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
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Online Marketplace company Teladoc(NYSE:TDOC) fell 4.4%.Is now the time to buy Teladoc? Access our full analysis report here, it’s free.
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Online Retail company Carvana(NYSE:CVNA) fell 6%.Is now the time to buy Carvana? Access our full analysis report here, it’s free.
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Online Retail company Wayfair(NYSE:W) fell 3.5%.Is now the time to buy Wayfair? Access our full analysis report here, it’s free.
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Gig Economy company DoorDash(NASDAQ:DASH) fell 5.9%.Is now the time to buy DoorDash? Access our full analysis report here, it’s free.
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Financial Technology company Coinbase(NASDAQ:COIN) fell 4%.Is now the time to buy Coinbase? Access our full analysis report here, it’s free.
Zooming In On Carvana (CVNA)
Carvana’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
