Oil slide wipes out market gains – CNBC.com
Tech was helped by Skyworks Solutions, up more than 7 percent after the Apple supplier raised its guidance for earnings and revenue for the quarter ended in September. Intel, reporting after the close, also was trading higher.
The good news for semis comes after Microchip Technology lowered its forecast for its fiscal second quarter after chip sales fell short. Beaten-down chip names like Cree, RF Micro Devices and NXP Semiconductor also jumped, while Microchip was lower.
“Energy is a little more diverse for small (caps). Oil prices are going down because the potential for global growth is slower,” said Steve DeSanctis, director of small cap research at BofA Merrill Lynch. He said small cap energy was up about 24 percent earlier in the year, and is now down 40 percent.
DeSanctis said small caps may have bottomed, and they could benefit from earnings as more start to be reported.
The earnings season has just gotten underway, and big bank earnings were mixed Tuesday but comments from CEOs were fairly upbeat. Citigroup was higher on an earnings beat, and JPMorgan was slightly lower after reporting an earnings miss but better revenue.
Read MoreBank CEOs see U.S. economy improving
One trader noted the big surge in volume in ETFs late Monday suggested an asset allocation trade in such things as the consumer discretionary sector, First Trust Consumer Discretionary Fund FXD, financials, First Trust Exchange Traded Alphadex Fund FXO and materials—First Trust Materials Alphadex Fund FXZ.
As stocks bounced early Tuesday, Treasury yields came off their lows. The 10-year, following Europe’s lead, touched 2.176 percent but edged higher to 2.20 percent. Jeffrey Gundlach, CEO and CIO of DoubleLine Capital, told CNBC that he believes rates put in a bottom and that stocks likely hit their high of the year when Alibaba went public.
Read MoreWe’ve seen the bottom for rates: Gundlach
David Ader, chief Treasury strategist at CRT Capital, said it’s unclear whether the bottom is in for rates, and that it will depend more on the behavior of other markets.
“The fact is we’re not here because of intrinsic reasons that are the Treasury market alone. We’re here because of events in other markets,” he said.
Read MoreMortgage rates dip below four percent
“If stocks do what they did yesterday again, we’ll blow 2.20 and fall further,” he said. It was trading with a yield of 2.19 percent late in the day.
Ader pointed out that the five-year and seven-year notes outperformed longer duration securities, and that suggested an asset allocation trade away from things like high yield, emerging market or European sovereign debt.
“It has less to do with the Fed than those markets,” he said, adding that where the central bank does matter is in the market’s shifting view that there is less risk of a rate hike than there had been several weeks ago.
“The market (a month ago) was giving 8.3 percent odds fed funds would be no more than 50 basis points by the end of next year. Today, they’re giving us over 27 percent odds,” he said.
Ader said another wild card is how different asset classes will deal with the end of quantitative easing, which the Fed is expected to announce at its next meeting.
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Oil slide wipes out market gains – CNBC.com
