The Fifth Avenue Apple Store in New York City during the launch of Apple’s new iPhone 13 and iPhone 13 Mini.
Spencer Platt/Getty Images
Apple stock fell, as did the rest of the Big Tech gang. The Dow Jones Industrial Average, however, rose because rising bond yields indicate that investors are feeling more confident about the economic recovery.
Apple (ticker: AAPL) and the Nasdaq 100 fell 1.1% and 0.8%, respectively. That index contains 100 of the largest-capitalization stocks in the Nasdaq Composite, including Microsoft (MSFT)—down 1.7%—and Amazon.com (AMZN)—down 0.6%.
There seem to be two main drivers of the decline in these stocks. First off, long-dated bond yields are rising, with the 10-year Treasury yield hitting as high as 1.5%. Its low last week was 1.31% before it began surging. Higher bond yields make future profits less valuable—and investors expect supercharged profit growth for many years ahead from most big tech stocks. “As rates have gone up, people have sold growth,” says JJ Kinahan, chief market strategist at TD Ameritrade.
more tech news
Secondly, the higher yields are coming at a moment when these stocks have already enjoyed a strong run. The Nasdaq 100 is up almost 4.4% since June 30, crushing the Dow’s gain of 1.5% in that time span. “People’s first instinct is to take some profits on growth, which has had a good run in the past few months,” Kinahan said.
Meanwhile, the value-oriented Dow is moving higher, up 71.37 points, or 0.2%. The index is heavily comprised of value companies, the earnings of which are largely more sensitive to changes in economic demand. With bond yields up—and the possibility that a 2022 Federal Reserve interest rate hike won’t damage economic growth—value names are enjoying a run. Boeing (BA) stock gained 1.3%, while Caterpillar (CAT) rose 1.6%.
If anything, the Fed’s higher interest rate projections indicate to markets a high degree of confidence in the economy—for now. And ultimately, that’s bad news for the stocks that don’t need a solid economy to grow their businesses.
Write to Jacob Sonenshine at [email protected]
