The Nasdaq Composite has fallen by close to 7% since Monday.
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Tech stocks are suffering fresh losses on Thursday, as spiking bond yields continue to spur investors to move out of cloud, e-commerce, and semiconductor stocks and into other more economically sensitive—and cheaper—issues.
The group started the day in the green, but reversed course when comments by Federal Reserve Chairman Jerome Powell at The Wall Street Journal Jobs Summit triggered a new upward move in interest rates.
The yield on 10-year Treasuries now sits at about 1.54%, up from under 1% at the beginning of the year.
Multiple factors appear to be feeding both rising yields and and shifting investor sentiment. Interest rates are moving higher in part in anticipation of the re-opening of the U.S. economy and a return to growth later in the year. Good news on the Covid-19 vaccine front—President Joe Biden this week said that any adult who wants a vaccine should be able to get one by the end of May—is adding to optimism about a rebound for segments of the economy badly affected by the pandemic, including travel, physical retailers, and restaurants.
With many tech stocks still trading at historically high valuations, investors have been taking profits and shifting to other investment options.
The Nasdaq Composite, down 2.9% on Thursday, has tumbled close to 7% since Monday—and the index is off more than 10% since closing Feb. 12 at 14,095.47. Semiconductor stocks, which held up better than other tech shares earlier in the week, were especially weak on Thursday, down about 5.7% as measured by the SMH, a semiconductor ETF.
Investors are dumping some of 2020’s biggest winners. Shopify (ticker: SHOP), a provider of cloud-based tools for online shopping sites, is down 8% on the session, expanding its loss to 24% in less than a month. Zoom Video Communications (ZM) shares, down 2% on the day, have fallen 24% since their intraday peak on Tuesday, despite a strong earnings report on Monday. Peloton stock (PTON) is off 19% since Monday.
In Thursday’s slide, the tech selling spree has turned indiscriminate. It now includes both hardware stocks that should benefit from reopening—like Cisco Systems (CSCO) and HP Enterprise (HPE)—and obvious beneficiaries of a normalizing environment, like Uber Technologies (UBER), which is down 7%.
Write to Eric J. Savitz at [email protected]
