Evergrande default

US tech stocks plunge as Treasury yields rise

Stocks dived on Tuesday in America as investors observed an anxiety-inducing rise in US Treasury yields

The Nasdaq, weighted largely towards tech and other growth stocks, is down by 2.68%, underperforming America’s two other indices.

The S&P 500 is down by 1.87% at lunchtime, while the Dow has shedded 1.36%.

The sell-offs come on the back of the Fed signalling that it would taper its monthly bond-buying in the near future.

A withdrawal from growth and tech stocks also means gains for Treasury yields.

The 10-year rate is up by 2.43% at the time of writing, while the 30-year rate is up by over 3%.

Yields move inversely to prices, and remained low during the pandemic. In general, rising yields mean an improving outlook in the economic environment.

“The market’s been steadily coming around to the reality that yields were awfully low relative to the fundamentals. Now the Fed is shifting, and everybody’s shifting their positions, all at once, as we tend to do,” said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.

Higher rates means the future cash flows of tech and growth stocks become less valuable, which makes them appear overvalued.

Facebook and Alphabet shares shedded well over 3%, while Amazon is down by 2.59%.

comments powered by HyperComments

Hot Tweets 🔥