(Reuters) – Investors and analysts reacted to a slide in heavyweight technology stocks as U.S. Treasury yields continued to climb, as investors factor in the prospect of more aggressive rate hikes from the U.S. Federal Reserve. [.N]
PETER TUZ, PRESIDENT OF CHASE INVESTMENT COUNSEL IN CHARLOTTESVILLE, VIRGINIA:
“It’s somewhat related to the rise in interest rates we’ve seen since the start of the year. Higher multiple stocks with no earnings and dividends are suffering as a result.”
“People are worried about the earnings season coming up whether Omicron will hurt numbers. Across the board people are worried Omicron is going to result in a mini-slowdown for a while.”
“People remain concerned about what inflation looks like and how the Fed is going to act to mitigate the situation. The concern is related to every stock but may affect technology.”
“Technology, especially companies with low or no profits and/or high multiples, get hurt when rates move up sharply because future earnings and what they’re worth today become more suspect.”
LINDSEY BELL, CHIEF MONEY & MARKETS STRATEGIST, ALLY INVEST, CHARLOTTE, NORTH CAROLINA (FROM AN EMAIL)
“Tech investors get nervous when the Fed starts planning to hike rates, because it means growth won’t be worth as much tomorrow as it is today. Despite that, history shows tech can perform well in the 12 months following the first hike.”
“Emotions are running hot right now. Cooler heads will prevail when the rate environment is better understood. If the Fed raises rates at a smooth and steady pace, cash flow and margins can more easily be managed. S&P 500 earnings growth is projected to slow to a more normal rate this year. In that type of environment, tech is usually one of the better places to find reliable and outsized growth.”
RANDY FREDERICK, MANAGING DIRECTOR OF TRADING AND DERIVATIVES AT CHARLES SCHWAB IN AUSTIN, TEXAS
“Technology is not going away as a group. The stronger, bigger mega-cap ones are going to do fine but the smaller, newer upstarts and those that are leveraged are going to struggle the most, and that will probably continue for a while.”
“You have a lot of newer tech companies that have gone public within the last couple of years that have a lot of debt, they don’t have necessarily good cash flows yet, or they don’t have profits. They may have bright prospects down the road, but in the immediate term, people are getting a little bit more cautious because of the Fed’s plan to hike rates soon and they are going to move away from those names.”
CHRISTOPHER MURPHY, CO-HEAD OF DERIVATIVES STRATEGY, SUSQUEHANNA (FROM A RESEARCH NOTE):
“It appears the turmoil that was initially isolated to the Tech sector is spilling over to the rest of the stock market. We are not seeing a rotation today, we are seeing every sector being sold.”
(Reporting by Bansari Mayur Kamdar in Bengaluru and Gertrude Chavez-Dreyfuss and Sinead Carew in New York; Compiled by Megan Davies; Editing by Matthew Lewis)
