Big Tech’s stock market leadership threatened by rising rate… – MENAFN.COM

Big Tech’s stock market leadership threatened by rising rate… – MENAFN.COM

(MENAFN- Gulf Times) Megacap technology stocks rallied through a global pandemic, fears of a bubble and rising regulatory scrutiny. But the bond market could be the hurdle that finally trips them up.

Apple Inc, Microsoft Corp, Amazon.com Inc, Alphabet Inc and Facebook Inc, the five largest US companies, have delivered reliable outsized gains to shareholders for years. Last week was different, as a selloff erased more than $300bn from their combined market value and sent the Nasdaq 100 to its worst week since late February.

The reason? A sudden spike in Treasury yields that sent tremors through Wall Street, causing investors to flee stocks with the highest valuations because their distant earnings gains will be less valuable as rates rise. The moves exposed a rare vulnerability for tech giants, whose strong balance sheets, powerful profit engines and steady business models have kept them going through periods of tumult and transformed them into a quasi-safety trade.

“Their Achilles heel is higher rates,” said Mike Mullaney, director of global market research at Boston Partners.

Surprising speed: Investors have been warning for months that US bond yields were bound to rise with inflation climbing and the Federal Reserve preparing to rein in its asset purchases aimed at