NYSE Senior Market Strategist Michael Reinking joins Yahoo Finance to discuss the recent pullback in the market, the state of tech stocks, and his predictions on tapering.
JULIE HYMAN: If I look at NASDAQ 100 futures here this morning, we're looking at an indication for a gain of about 1/4%. And I'm focusing in on the NASDAQ 100, of course, because that is where the most pain was felt in yesterday's session. Going to try and go on over to the heat map once again this morning. And here you have that NASDAQ 100, the market cap weighted NASDAQ 100. And as I look here around at these large cap stocks, you can see the numbers below are pretty much all showing gains in pre-market trading. But they are pretty modest gains in most cases here.
If you looked at Apple yesterday, and its shares down about 2 and 1/2%, if you looked from September and the most recent peak that we had for those Apple shares, which was right around September 7th, the shares are down about 11% since then. So that is what folks technically tend to call a correction. And it's not a loan. That's something that we have seen in a lot of the other tech stocks as well.
Facebook, obviously, we've been watching very closely and the declines that it has had as of late. Yesterday was its biggest single day drop, going back to November of 2020. But obviously, it has been trending lower as well. And if you look at that company's year-to-date performance, also, you can see it's up about 19%, but again, this downward trajectory that we have seen in the month of September.
So that's been a pretty common theme among large cap technology. You can look at Microsoft as well. Here's the year-to-date. It's gone a little bit more sideways than down. But the general trend has been intact for many of these large cap tech firms. So this is something that we're going to continue to watch, Sozz, of course, as we start to get underway this morning.
BRIAN SOZZI: Yeah, let's stay on all things tech and bring in Michael Reinking. He is a senior market strategist at the NYSE and joins us now. Michael, good to see you here. This tech sell-off is starting to get ugly. Do you see a bottom in sight?
MICHAEL REINKING: Well, you know, look, we are in the midst of the first meaningful pullback we've seen in the market for some period of time now. It's been ongoing for about a month. You know, we have seen, you know, tech start to roll over, primarily as we saw a shift in global central bank policy over the last few weeks, and interest rates have started to move higher.
But at this point, you know, we have seen, as of yesterday, the NYC FAANG Plus Index was down about 10% from the highs. So we have definitely started to kind of re-rate some of these stocks. And as we start to approach earnings season, we're going to be reminded once again of how resilient those profits are.
JULIE HYMAN: Just want to pause because we're coming up on the opening bell here in about 30 seconds or so. Benson Hill is ringing the opening bell. That company is having a listing. And this is, I believe, a plant-based food company, if I'm not mistaken, or it's a sort of food technology company. So we'll be watching to see how that stock does in today's session. And of course, we're really going to be paying attention to what technology is doing with its [INAUDIBLE]. Our round the clock coverage, by the way, is brought to you by Pimco, [INAUDIBLE]
Michael, [INAUDIBLE] In addition to watching technology very closely, we, of course, have been also been watching what's been going on in the commodity complex, with various indices that track commodities reaching records with oil prices trading at their highest since 2014. How much of an obstacle do you think this is going to be for stocks?
MICHAEL REINKING: Right, so I mean, yesterday, we had OPEC Plus, you know, leave, you know, their production quotas unchanged. And so that's added to the strength that we've seen in oil prices. And, you know, with the power crisis that's going on around the globe, that's adding to inflationary concerns, as well as potentially adding to the supply chain issues, the supply chain disruptions that we've seen throughout the market.
So, you know, it is a headwind. As we're coming into earnings season, we've seen a few kind of high profile companies point to higher transportation costs and the supply chain disruptions in terms of taking down numbers. So, you know, it is starting to come through in the numbers. And it is a concern for investors.
BRIAN SOZZI: Mike, I want to go back to it. You just flagged the NYSE FAANG Index. It's a very popular ticker and chart here on the Yahoo Finance platform. It just broke below its 200-day moving average yesterday, first time in 18 months it has done that. What would you need to see to signal that the selling is done? What has to happen?
MICHAEL REINKING: Well, I would have preferred to see a down open today, actually a significantly down open. That would have been a better setup, generally speaking, for a short-term rebound. Having these kind of opening markets where markets open a little bit higher and then we can drift lower doesn't kind of wash out some of the selling. I really think that the key catalyst here is going to be in a couple of weeks, as you start to see a lot of these names, you know, report their earnings. And while the comps are going to be tough, I think it's going to remind people of just how resilient these business models are.
JULIE HYMAN: And so, it sounds like you think things are going to come back here. How much are people down there talking about rates, though, and how much that could continue to be an obstacle?
MICHAEL REINKING: Well, so I think the concern from the rate environment, we are definitely seeing central banks around the globe start to remove the uber accommodative policies that they put into place during the crisis. And the concern over the last couple of weeks has been about the pace of the movement rates. I don't think it's about the absolute level. 1 and 1/2% on the 10-year is not something that is a restrictive-- you know, a restrictive level of interest rates.
So I think, assuming that rates kind of fall into a range and we don't see them move substantially higher in a very fast fashion, I think you've seen this rerating. If you actually look at the tech industry from the start of the year, looking at their earnings estimates for next year, the industry has the-- it's trading at four-- you know, the turn-- sorry, excuse me. The PE is actually decreased by about four turns, right, since the start of the year, from 28 times to about 24 times. So, you know, we are-- you know, that's not cheap, but we are seeing-- we're starting to see that get more reasonable.
BRIAN SOZZI: Michael, the jobs report misses headline estimates on Friday. What's the market reaction?
MICHAEL REINKING: So while I think there's going to be a big focus on the jobs report, I think that number's been somewhat diminished by comments from Fed Chair Powell at the meeting, you know, a couple of weeks ago, when he said that he would only need to see a reasonably good number to be prepared to move forward with the taper announcement. So barring a number that is below 100,000 or 200,000, you know, I don't think that that number is going to necessarily move markets meaningfully.