{"id":54881,"date":"2023-12-13T18:21:17","date_gmt":"2023-12-13T18:21:17","guid":{"rendered":"https:\/\/prosfunds.com\/investing\/magnificent-sevens-bonds-may-have-been-sending-a-signal-to-stockholders\/"},"modified":"2023-12-13T18:21:18","modified_gmt":"2023-12-13T18:21:18","slug":"magnificent-sevens-bonds-may-have-been-sending-a-signal-to-stockholders","status":"publish","type":"post","link":"https:\/\/prosfunds.com\/?p=54881","title":{"rendered":"\u2018Magnificent Seven\u2019s\u2019 bonds may have been sending a signal to stockholders"},"content":{"rendered":"
\n

Has the corporate bond market been flashing a signal to the stock market about the so-called Magnificent Seven grouping of technology stocks? <\/p>\n

After holding up during the late summer period when four of that group\u2019s stocks moved into correction territory, the bonds have seen net selling over the last two weeks, led by Apple Inc.
\n AAPL,
\n +0.87%<\/bg-quote>,<\/span>
\n which has the most outstanding debt of the group.<\/p>\n

\n

One caveat: Tesla Inc.
\n TSLA,
\n -2.73%<\/bg-quote>
\n has no outstanding bonds. In the past, the electric-car maker issued convertible bonds, but they have all been converted into equity. <\/p>\n

The other five companies in the group are Facebook parent Meta Platforms Inc.
\n META,
\n -0.34%<\/bg-quote>,<\/span>
\n Microsoft Corp.
\n MSFT,
\n -0.25%<\/bg-quote>,<\/span>
\n Nvidia Corp.
\n NVDA,
\n +0.36%<\/bg-quote>,<\/span>
\n Amazon.com Inc.
\n AMZN,
\n -0.19%<\/bg-quote>
\n and Google parent Alphabet Inc.
\n GOOGL,
\n -0.55%<\/bg-quote>\n <\/p>\n

The seven companies are credited with helping drive the stock market\u2019s gains in the first half of the year, driven by excitement about artificial intelligence. <\/p>\n

But with their lofty valuations, they now make up nearly one-third of the S&P 500\u2019s aggregate market value, giving them a disproportionate impact on the overall performance of the index.<\/p>\n

\u00a0Apollo Global Management\u2019s Torsten Slok\u00a0said the group is showing similarities to the \u201cNifty 50\u201d names of the early 1970s, that were highfliers early in that decade before shedding more than 40% of their value in the bear market of 1973 and 1974, as MarketWatch\u2019s Joe Adinolfi reported. <\/p>\n

See also:<\/strong> The Magnificent Seven could be called the messy seven after a \u2018meh\u2019 third quarter<\/p>\n

As the following charts from data solutions provider BondCliQ Media Services illustrate, the bonds have seen net selling overall for the last two weeks, with Apple accounting for the bulk of that volume.<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n
<\/div>\n<\/figure><\/div>\n

The next chart offers a breakdown of selling by customer type. Volume is neck-and-neck between Apple and Amazon, but Apple bonds have seen more net selling. The only one in the group that remains net positive is Meta. \u00a0<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n
\n \"\"\n <\/div>\n<\/figure><\/div>\n

The selling has come as spreads have been tightening. That suggests that some of the selling may have been profit-taking or a move down in quality against a background of strong credit markets.<\/p>\n

\u201cYou don\u2019t need to buy highly rated Microsoft when you feel good,\u201d said Winnie Cisar, head of global strategy at CreditSights.<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n
\n \"\"\n <\/div>\n<\/figure><\/div>\n

The following chart shows the group by maturity bucket.<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n
\n \"\"\n <\/div>\n<\/figure><\/div>\n

Stock investors are showing some signs of fatigue with Nvidia, which closed down 2.5% after its recent blowout earnings. That was a far cry from the kind of response the stock saw earlier this year when it trounced consensus estimates. <\/p>\n

Analysts were upbeat on the numbers, however \u2014 and the stock has gained 227% in the year to date, so some profit-taking was likely. <\/p>\n

\u201cAnother remarkably strong set of results and guidance, in our view likely clearing sky-high hurdles set by investor expectations,\u201d TD Cowen analyst Matthew Ramsay wrote in one example, as he kept an outperform rating and $700 target price on the stock. <\/p>\n

\u201cWe continue to believe the industry is in the early innings of two transformational paradigm shifts toward ubiquitous acceleration and generative AI, with Nvidia\u2019s wide moat potentially expanding. It\u2019s just that simple.\u201d<\/p>\n

For more, read:<\/strong> Nvidia\u2019s big beats don\u2019t wow like they used to \u2014 but here\u2019s the good news for the stock<\/p>\n

Read now:<\/strong> Nvidia pulls further away from other chip makers by this one measure<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Has the corporate bond market been flashing a signal to the stock market about the so-called Magnificent Seven grouping of technology stocks? After holding up during the late summer period when four of that group\u2019s stocks moved into correction territory, the bonds have seen net selling over the last two weeks, led by Apple Inc. 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