The market appears to be entering a positive period after the Nasdaq shakeout, and big-cap tech has gotten cheap enough to buy, according to BTIG’s Julian Emanuel.
Emanuel said big cap tech growth stocks, like “FANG” (Facebook, Alphabet, Netflix, Google-parent Alphabet), have been beaten up enough after losing ground in the tech correction, as the Nasdaq Composite fell more than 10% in a matter of weeks. The S&P 500 lost just under 6% in that time.
“We just think you’re in a period where the market could really just be looking at glass half full situation with regard to the Nasdaq — and financials, and energy and industrials, everything that has been working,” said Emanuel, the firm’s head of equity and derivatives strategy. “I think the next month or two could be quite positive for markets. Assuming that yields behave as they did for the last week.”
Emanuel said it was significant that Treasury yields did not shoot higher last Friday, when the February jobs report came in surprisingly strong. The 10-year yield, which moves opposite price, was flat Wednesday morning at 1.54%.
“That tells us at a minimum that yields could go higher, but the rate of ascent is muted,” he said. “I just don’t see the conditions for runaway upside in yields.” Emanuel added the Treasury market has been responding to the outlook for better growth and that inflation expectations have not increased that much.
Emanuel said he is watching the $38 billion 10-year note auction Wednesday at 1 p.m. ET for further clues as to whether the rise in yields is cooling. The 10-year yield has gone as high as 1.61% after starting the year at 0.91%. The rise accelerated in February to a pace where the stock market had difficulty digesting it, he said.
Emanuel warned in mid-February that the jump in interest rates had set off a stock market correction. He believes the tone has now changed, however.
“Yields are where they are. We don’t see where they’re going to go screaming off higher, and the public is very engaged in the market, and there are a bunch of stocks that are down and are going to have double digit earnings growth and are going to be secular growers,” he said. “I haven’t liked FANG for 2-1/2 years. You’ve got to own them here.”
Facebook, Amazon, Netflix and Google-parent Alphabet rose Tuesday as the Nasdaq Composite jumped 3.7% in its best day since November. Apple gained 4% in that session. Investors also poured into Tesla, another growth favorite, which surged 19%.
“We just think there’s a coming period of stability in all of these things, and in a week or two or three, equity investors are going to get back to equity investing and stop worrying about [every] tick in the bond market,” he said. “That’s a positive for the market.”