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Tech stocks bounce as interest rate instability eases

High-tech stocks rebounded from plunge after Federal Reserve Chairman Jerome Powell pledged Support economic recoveryAlleviates concerns about the impact of rising interest rates on the months-long rise in major US indices.

The Nasdaq Composite fell 0.5% on Tuesday, but fell 4% earlier that day. Focusing on technology, biotechnology, and the share of other companies that are committed to growing faster than the economy, the index that led the 2020 market recovery from the coronavirus pandemic was in February. It has fallen 4.5% since the 12th.

Tuesday’s volatility goes beyond the favorites of the past year and highlights a midwinter shift in investors’ desire for the real economy sector, including banks. Reassessment is driven by investor expectations. Covid-19 vaccination Recover and expand the scope of economic recovery to a wider range of companies. This month’s rise in US interest rates has forced a reassessment of the risk of equity holdings, which has risen sharply over the past year, raising concerns about long-standing valuations.

The backlash following Mr Powell’s testimony before Congress continues to believe that investors are the best place to invest in U.S. stocks in the long run, while being sensitive to the effects of rising interest rates. It shows that.

Mike Bailey, Research Director at FBB Capital Partners, Investment Manager in Bethesda, Maryland, said:

The broader market has risen, boosted by rising energy, utility and financial shares. The Dow rose about 16 points and the S & P 500 rose 0.1%.

Early sale on Tuesday was the most common of some of the shares that investors considered likely to be pandemic winners and beneficiaries of government stimulus.Electric car maker

Tesla Co., Ltd.

TSLA -2.19%

Opened and dropped by 13% shortly after the Covid-19 vaccine developer

Modana Co., Ltd.

It fell by 14%.

Inflation remains weak, Powell testified in parliament, and fell after raising interest rates in late February eased some investor concerns that could force central banks to accelerate their plans to raise interest rates. Was relaxed. Instead, Powell said interest rates remained low as the Fed was trying to boost job growth. Tesla fell 2.2% and Moderna fell 5.8%.

Technology sales have lowered some of the pandemic’s biggest market winners, many from Silicon Valley. Part of the market has seen signs that contraction may be imminent due to the boom last month and the plunge in stock prices. Popular on social media forums GameStop Inc fell 2.2% on Tuesday. Such.

“Many stratospheric stocks are declining, after which the next layer is expensive tech stocks like Tesla,” said Bailey of FBB Capital.

Indeed, the sale is the flip side of investment strategy, with tech companies gaining popularity among small investors who have accumulated equity and options trading over the past year, with Nasdaq up 44% in 2020. In 2021, we set 12 financial records. ..

But for the past month

Apple Co., Ltd.

Food delivery service DoorDash Inc. was down 10%, down 9.5%. Tesla highlighted a tech-led market recovery last year with the sale of the coronavirus, but it fell in 2021 and is about a quarter of its value since it was announced by electric car makers on February 8. Lost. Was spending $ 1.5 billion on Bitcoin To increase cash revenue.

The market reversal extends beyond these companies to those that are most profitable from the tendency to work from home, such as home improvement retailers, enforced by Covid-19 restrictions.

Home Depot Co., Ltd.

And

Loews

Cos. Home Depot fell 3.1% on Tuesday after an Atlanta company announced that same-store sales (adjusted for number of stores) increased slightly from flat this year, compared to a 20% increase in the previous fiscal year. The month you did. Loews fell 2.2%.

Smaller stocks, which are also recent winners, have also fallen as investors bet that local-minded US companies will benefit from exciting infrastructure investments. Russell 2000 Index stocks fell 3.6% on Tuesday, then 0.9%, and this week to 1.6%. The index has risen 44% in the last six months, again raising valuation concerns.

Jason Bulinski, Chief Investment Officer at First Midwest Bank, said last week’s sale was “a valuation reset for both small cap and technology, given the spectacular tears of both asset classes.”

These concerns were clear enough to overcome what could have been welcome news from the Fed another day. In a testimony prepared before Congress, Powell signaled that “the economy is far from our employment and inflation goals,” despite signs of recovery since the pandemic began.

The long wait at the charging station is over. Chinese electric vehicle startup NIO is a pioneer in battery replacement systems, challenging Tesla and other rival car makers. Here’s how NIO and Tesla are competing for the world’s largest EV market in China.Photo Illustration: Sharon Sea

Investors received comments as a sign that the Fed’s rate hike is “still a few years away,” said Paul Ashworth of Capital Economics. The mild tone eased the bank rush and the Nasdaq KBW Bank Index, a major US lender, rose 0.9%. It will increase by 19% in 2021.

The shift from pandemic favorites reminded us of the risk of more volatile investments. According to Bailey, FBB Capital is cautious about equities and is buying corporate bonds as part of its commitment to a changing environment. Michael Scanlon, portfolio manager for John Hancock Balanced Fund at Manulife Investment Management, is reducing its stake in the fund and selectively purchasing high-yielding investment grade corporate bonds.

Still, interest rates remain low, the Fed remains on hold, and inflation has not yet emerged. As a result, many investors are betting that the sale will soon pass and that tech high flyers in recent years will resume their rise.

Scanlon said his fund holds a significant stake

Microsoft Co., Ltd.

, Google parents

Alphabet Co., Ltd.

And

Broadcom Co., Ltd.

“In this environment, we still want to own a company with dominant market share and growth potential,” says Scanlon. “I don’t think trade will suddenly expire.”

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

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Tech stocks bounce as interest rate instability eases

Source link Tech stocks bounce as interest rate instability eases

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