Stocks pulled back with tech leading the way lower while banks and utilities held up well. Rising interest rates are the main culprit and some gurus are also concerned about rising input costs. What is interesting about the pullback is that several sectors which did not shoot up like Amazon are not really pulling back right now. Once case in point are bank stocks. They currently have strong earnings growth, rising dividends and cheap valuations and while the NASDAQ is now off 9% from its recent high (it is still up 9% ytd) the regional bank index is relatively flat. The gurus are pointing to strong underlying economic fundamentals in the US and the general feeling is that any pullback could be temporary. Brian Wesbury at First Trust calls today’s action a good entry point. Allianz noted that this pullback is “headline news” related and not related to fundamentals. We shall see how it plays out. At the close the Dow was off 830 points (2.6%) on heavy volume to close at 25,598. IBD has markets now in correction mode.
Earlier this summer I had heard rumors that there was to be an announcement regarding an infrastructure push but so far there has been no news on it. In snooping around it seems that infrastructure spending is being carried out piecemeal at the local level instead of a huge nationwide effort. Certainly, here in Seattle there are more transit and road projects than you can shake a stick at and Congress just passed a big bipartisan water infrastructure bill to rebuild dams, ports, waterways, water and sewer systems. One fellow I know who works at the USDA Rural Development Corp said their funding this year was suddenly doubled, and they are scrambling to put it to work on water sewer projects for small towns around Washington State. He also said that other states saw big funding increases as well. While there still might be a big nationwide infrastructure announcement it appears that for the time being the effort is being made below the radar on a more local basis.