Traders at JPMorgan expressed concerns about the stock market's stability, stating they have become 'tactically cautious' as volatility in the bond market and a selloff in technology stocks persist. Despite confidence in the market's fundamentals, they anticipate a pullback, especially following a significant drop in the S&P 500, which fell over 2.6% recently.
The Nasdaq Composite also experienced its worst day in over a year, declining by 4%. Although there was a rebound on Monday, with stocks like Micron Technology rising 9%, the trading desk warns that continued selling in tech could occur, particularly with the upcoming SpaceX IPO prompting profit-taking in high-flying sectors.
Concerns in the bond market are also notable, with the 10-year Treasury yield remaining above 4.5%, and upcoming inflation data could exacerbate this issue. While the underlying economic indicators, such as strong corporate earnings and a robust labor market, remain positive, the near-term outlook is challenging.
Consequently, JPMorgan is favoring value stocks and defensive sectors like consumer staples, utilities, and energy over more cyclical growth stocks, advising a gradual approach to buying into the market