Yahoo! Inc. (NASDAQ:YHOO) is not only facing the fear of investors fleeing away after Alibaba’s IPO stops being the headline, but might also suffer from a liquidity crisis that might be brewing up in the stock market. In a discussion on CNBC about the ensuing macroeconomic climate, Tom Joyce of the Knight Capital was joined by CNBC’s team of Sara Eisen, Guy Adami and Jon Najarian.
“[…] These big IPOs suck a lot of liquidity out of the market and to me this is what the market has been all about, liquidity. I mean look at, again, we have strong dollar, because the Fed has been flooding the market with money, which brings us, we think, to the precipice […],” said Joyce.
There were two components of liquidity crunch being discussed at CNBC. Firstly, Alibaba’s IPO which is the world’s biggest and Yahoo! Inc. (NASDAQ:YHOO) is a major stakeholder in the company and secondly, the Fed tapering down its quantitative easing program.
This tapering down has led to a stronger dollar in the currency market, especially as compared to Yen, which saw a six year low, explained Eisen. She also said that American companies who have a glabal exposure, (Yahoo! Inc. (NASDAQ:YHOO) for example) are more sensitive to a strengthening dollar. These companies have thrived in a weak dollar environment, and FED’s meeting next week will reveal more about their future outlook depending on how the tapering program progresses.
Najarian however, had a very positive outlook about the US dollar remaining weak, despite the contrary signs that have prevailed this week in the bond market. The yields on both the 10-year and 30-year bonds have increased significantly during the week, but Najarian sees this just as a blip in the long run. He said that the rates are actually headed a lot lower.
The question still remains how Yahoo! Inc. (NASDAQ:YHOO) and other stocks are going to perform in these macroeconomic challenges? At this point it’s more of a guessing game before the Fed’s meeting next week which would certainly provide more clarity to this picture.