A late-afternoon burst of buying sent stocks higher on
The S&P 500 index was up 0.4% as of
Since the pandemic began, investors consistently pushed the prices of these companies' stocks to stratospheric heights, betting that quarantined consumers would do most of their shopping online and spend money on devices and services for entertainment.
The bet mostly paid off, as big tech companies reported big profits last year. But the pandemic may be reaching its end stages, with millions of vaccines being administered each week in the
By late afternoon, however, those tech stocks had erased most if not all of their losses from earlier in the day.
Investors remain increasingly focused on a big tick up in bond yields and how it affects stock valuations. The yield on the 10-year
When bond yields rise, stock prices tend to be negatively impacted because investors turn an increasingly larger portion of their money toward the higher, steadier stream of income that bonds provide.
“If you have a 10-year (
While eventually bond yields impact big dividend-paying stocks like consumer staples, utilities and real estate, it does tend to impact stocks that have big valuations like technology stocks much earlier. Tech stocks tend to have higher-than-average price-to-earnings ratios, which values a stock on how much the company earns in in profits each year versus its stock price. The S&P 500 index is currently trading at a price-to-earnings ratio of 32, historically high by any measurement, while the price-to-earnings ratio of a company like Amazon is north of 75.
Jablonski expects the sell-off in technology stocks, which have fallen five days straight, will be short-lived, though she adds that a further increase in the 10-year
“The 10-year was sort of the news of the week that took some of the fire out of equities, but I wouldn’t be surprised that investors looking for entry points are going to get back in at these levels,” she said. "Stocks still have a future that looks to me to be a lot brighter than the value investors are going to get if they convert to bonds.”
More broadly, investors remain focused on the future of global economies badly hit by COVID-19 and the potential for more stimulus to fix them. The
The large amount of stimulus being pumped into the economy has given some investors pause, reviving worries about inflation that have been nearly nonexistent for more than a decade. The inflation worries have been a big driver of why bond yields have risen.
“Overall, the view is this rise in yields is just a reflection of confidence in economy and the vaccine rollout,” said
“Right now, this rise in yields, given the fact that financial conditions are still loose, is not a red flag,” she said. “As long as growth supports the rise in interest rates, then that’s not a concern.”
Federal Reserve Chair
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