It was a reasonably dull day for the market yesterday, with the S&P 500 flirting around the flat line all day. We did catch a late-day rally, with the index rising around 70 bps. Most of the rally was due to the VIX melting into the end of the day. With Vixperation on Wednesday, I’m not sure there is that much room for the market to rise or fall. It is all just a mechanical piece of the market and not due to buyers suddenly coming alive.
But the most important news was that the real yield continued to move higher, and the TIP continued to move lower. The TIP ETF made a new cycle low today, trading around $109.15, and is now back to the pandemic lows and the 2018 lows. It carries a terrible message and one that stocks will likely head lower over the next couple of weeks.
Biotech
The XBI had a weak day, dropping by more than 1% despite the end-of-day rally. The biotech sector is very rate sensitive, and with real yields moving sharply higher and at new lows, one would expect to see the XBI dropping and probably going to new lows in the not-to-distant future.
ARKK ETF
The ARK Innovation ETF (NYSE:ARKK) also had a bad day, dropping by around 30 bps. Again, this falls into the same category as biotech. The higher real rates climb, the lower the valuation of the long-duration growth stocks that the ARKK ETF owns, which makes the NAV worth less.
Zoom
We talked about Zoom Video (NASDAQ:ZM) earllier, and it again is down around another 50bps and inching closer to breaking technical support at $76.45.
