The market is struggling again Tuesday morning as worries about a slowing economy around the world are still building. There are signs that inflationary pressures are dropping, but, unfortunately, the primary reason that there is less concern about inflation is that there are growing fears of a significant economic slowdown.
Oil is being slammed Tuesday morning, but not because there is more supply and some progress in Ukraine. Oil is down because of concerns that demand is dropping due to a collapsing economy. What makes matters even worse is that there still are inflationary pressures in food and other areas, so the danger of stagflation is building.
Weakness in the euro is a particularly good indication of how fear of a recession in Europe is gaining traction. The situation there is looking even worse than in the U.S., and that is impacting the mood in U.S. markets.
Stocks are acting very poorly, with breadth running more than 4 to 1 negative. New lows have not expanded too much so far as some of the worst groups are holding up, but sectors like semiconductors and big-cap technology are under heavy pressure.
One minor bright spot continues to be biotechnology (XBI) . This has been one of the worst sectors for over a year, and these stocks are finally seeing some relative strength. A couple of names on my list in that group Tuesday morning are bluebird bio (BLUE) , LianBio (LIAN) , and Aurinia Pharmaceuticals (AUPH) .
Growth stocks are also seeing relative strength. The top growth name on my screen is Snowflake (SNOW) . ARK Innovation ETF (ARKK) is trading up 2.5% as the S&P 500 is hit by 1.6%. This sort of relative strength is what we need, but it needs to be sustained.
The overall market is in terrible shape, but it is encouraging to see relative strength in the groups that started the bear market a long time ago. We had a rotational bear market with the indexes covering up the weakness for many months. Will we see a reversal of the action with the worst stocks acting better than the indexes?