The third day of the long expected earnings week brought a few negative surprises up. Dell received a downgrade and prices went downwards. By the way, Nasdaq 100 is one of very few indices that could not rebound on the second rebound up to the level of the first one but instead kept on falling. Those stocks are very vulnerable these days as growth concerns rise. Growth is THE thing a global macro analyst should think about when investing in stocks. The interest rate hikes have trimmed growth. Hence, the drop is not much of a surprise. Rate hikes have the effect that sooner or later they affect corporate earnings. It appears that sooner or later is now. If I see more disappointments in other sectors I will go net short next week. Global conflicts played in the cards, too.
After the news were spread into the world that Israeli troops went into Lebanon there started a continuous sell off across European equities. As a consequence, commodities such as gold and oil rose (they usually do during conflict times and especially now as they are scarce). That rise in case will cause higher inflation. That will increase the probability that the Fed will continue to raise rates which led to a very strong dollar today (I know, the save haven argument also played in favor of the greenback). But the rates story is more important as 10y-Treasuries prices fell.
It is neither a good time for stocks nor for bonds. Growth is @ risk for many reasons which hurts equities. The US has to finance a huge load of short-term dated debt that will put a strain on the bond market. Only higher yields will attract investors to bring their money to the US bond market. And, as in a beauty contest, when US yields "try" to look more attractive other yields have to rise as well or they will lose their appeal.
Unlike last year in October, where a lot of selling was fear induced (hurricane consequences) and the rewards were high for those who bought that fear now fundamentals are changing.