Tech Stocks Under Pressure Due to Rising Yields

Tech stocks are under pressure due to recent rising yields. In the last five days, the Nasdaq Composite Index has declined nearly 5%. In the past year, tech stocks were triggered by FOMO (fear of missing out) during the unprecedented global pandemic. At the time, investors bid up tech stocks that saw growth in their revenues. During the worldwide lockdown, technology companies recorded increases, especially gain in the number of users. Some of the companies are software company Zoom Video Communications Inc. (NASDAQ: ZM), Snowflake Inc (NYSE: SNOW), DoorDash Inc (NYSE: DASH), and Airbnb Inc (NASDAQ: ABNB).

Before rebounding by a 0.52% gain on the 26th of February, the Technology Select Sector (NYSEARCA: SLK) recorded losses for the year. The biggest influencer of XLK and S&P (NYSEARCA: SPY), Apple Inc (NASDAQ: AAPL), is one of the vulnerable stocks to the effect of rising yields. Since the beginning of the year, Apple has lost more than 8% and has dropped by 9.60% over the past month. The tech giant has also plunged 3.76% in the last five days. Additionally, Apple’s stock fell below its 100-day simple moving average (SMA) in the past week. Notably, AAPL had maintained the 100-day level since April 2020.

Selected Stocks that Survive Despite Rising Yields

According to a technology strategist at investment bank Baird, Ted Mortonson, the new tech dynamic is FOGK (fear of getting killed). MarketWatch analyzed past happenings leading to the tech stock teeter in a recent report. Reiterating that rising interest rates fueled the fall in tech stocks, the report revealed that the yield on 10-year Treasury notes increased from 0.93% recorded in early January. Now, the yield on 10-year Treasury notes has surged to 1.54%. Notably, top tech stocks would continue to suffer pressure as the rates go up. In an email, Mortonson said:

“Higher input costs are evident across the board.”

Speaking further, Mortonson believes that tech stocks would continue to correct for a while. Already, investors are ignoring pricey tech stocks but rather going after economically and rate-sensitive sectors. Such sectors include energy, financial services, industrial materials, and healthcare. He bet on Accenture Plc (NYSE: ACN) and Twilio (NYSE: TWLO) on digital transformation.

David Readerman, the general partner of Endurance Capital Partners, said that tech investors hide in “deep value.” The executive mentioned HP Inc (NYSE: HPQ), which beat Wall Street estimates in its 2020 Q4 sales and profits. The company has been growing significantly over the past year, gaining 17.81% in its year-to-date record.

Wireless Fund portfolio manager Paul Meeks suggested memory-chip maker Micron Technology (NASDAQ: MU). Other tech stocks that can survive through the rising yields are Hewlett Packard Enterprise (NYSE: HPE), IBM (NYSE: IBM), Cisco Systems Inc (NASDAQ: CSCO), Oracle Corporation (NYSE: ORCL), and Seagate Technology (NASDAQ: STX).

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Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.