Tech stocks fell. What does bonds have to do with it??

Акции технологических компаний упали. При чем здесь облигации?

On Tuesday, 28 september, major US stock indexes fell heavily, and the technological index Nasdaq showed the worst dynamics since March. According to experts, growth in Treasury yields is the main reason for the fall.

At the end of the main session, indices S&The P 500 and Dow Jones fell on 2 and 1,6%. Nasdaq lost the most - 2,8%. But the yield on ten-year Treasury bonds rose to the highest in the last three months - 1,53%. Back in August, the yield on these bonds was 1,13%.

At last week's meeting FRS noted the economic recovery and informed, what could cut incentive measures in the near future. Also, the head of the Fed Jerome Powell suggested, that due to supply chain disruptions, the inflationary period could be longer, what the regulator expected. Cuts in stimulus measures affect the debt market: the value of bonds falls, while profitability is growing.

Amid rising bond yields, fast-growing tech companies are losing the most: their future cash flows become less valuable. Popular companies look more and more overpriced, and the premium for the risk of owning such companies falls. It also becomes more difficult for a business to finance its growth and conduct buyback of shares.

A similar situation was already in March, when the yield on ten-year Treasuries rose to 1,74%. Here is what the investment company Academy Securities said then.: "Companies, who count on the growth of cash flow, experience greater risk when rates increase. This is why the Nasdaq index 100, which includes technology stocks, sags much more, чем Dow Jones».

Apple stock during the day, Microsoft, Amazon, Alphabet, Facebook and Nvidia fell 2-4%. Large tech companies have the most weight in stock indices and ETF, therefore they pull the entire stock market with them. “If the heavyweights are under pressure from rising bond yields, this will affect all promotions ", - noted in the investment company Susquehanna.

Акции технологических компаний упали. При чем здесь облигации?

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