Tech shares fall as bond yields rise

The movements are the most recent shock linked to the sharp increase in Treasury yields. The signs of a recovering economy have prompted investors to dispose of government bonds, raising yields. Higher yields mean that borrowing costs for companies and individuals will rise, so investors have been selling expensive tech stocks that seem less valuable in an environment of rising rates to accumulate stocks of companies that are expected to benefit from an economic recovery. .

The stock’s future began to decline overnight after the 10-year Treasury yield, a key benchmark for borrowing costs, rose to 1.747%, exceeding 1.7% for the first time since January 2020.

“This morning, the markets woke up and decided if the Fed is going to keep the policy so loose, they want a higher risk premium,” said Michael Matthews, a fixed income fund manager at Invesco.

A day earlier, the Fed had raised some growth and inflation projections based on the latest round of stimulus distributed by Congress and the launch of Covid-19 vaccines.

“It’s all about inflation expectations: the fact that we’re getting inflation expectations beyond the Fed’s target is scaring the bond markets,” added Edward Park, chief investment officer at Brooks Macdonald.

Investors sought out sectors such as banks, airlines and energy companies, which could benefit more when social and business activity intensified. Financial stock stocks in the S&P 500 were up 1.3% as investors estimated the likelihood that banks would earn more from the loans they issue. Utilities and manufacturers also traded a little higher.

Technology stocks in the index fell 1.5%.

Also on Thursday, the number of Americans applying for unemployment insurance for the first time increased to 770,000 in the week ending March 13, from 725,000 in the previous week. Although unemployment insurance claims, an indicator of layoffs, fell from their peak last year, they remain at historically high levels.

“What we have to look at is the employment numbers, and the central banks are all looking at it,” said Matthews. “The Fed and all central banks have decided that it is better to warm up the economy, to help the recovery, to get the lowest possible level of unemployment.”

Bond investors are betting that the Fed will raise interest rates over the next two years, despite Wednesday’s data showing that most policymakers still hope to maintain ultra-low interest rates until 2023. Only seven of the 18 employees Fed officials anticipated rate hikes in 2022 or 2023, up from five in December.

Abroad, the pan-continental Stoxx Europe 600 registered an increase of 0.2%.

In Asia, most of the main benchmarks closed higher. China’s Shanghai Composite Index was up 0.5%, while Hong Kong’s Hang Seng was up 1.3%. Australia’s S & P / ASX 200 fell 0.7%.

—Michael Wursthorn contributed to this article.

Write to Caitlin Ostroff at [email protected]