The extended sell-off seen in the market since April 12 has been led by high-profile tech stocks, which ironically were the leaders of the rally that began in 2023.
The Tech Rout: The broader market, which rallied through 2023, carried over the momentum into the new year and the upward trend continued until March. In April, rate-cut bets began to unravel as inflation stalled its downtrend. Federal Reserve officials, who hinted at up to three Fed funds rate cuts following the March monetary policy meeting, began to sing a different tune.
Bond yields began to spike higher in reaction, with the 10-year note yield jumping to a high of 4.696% this week before slightly easing off the level.
All these factors exerted downward pressure on tech stocks, which fall under the category of growth stocks. A higher interest-rate environment is seen as detrimental to these stocks because it diminishes their long-term discounted cash flow and makes it harder for them to secure low-cost debt financing.
The tech-heavy Nasdaq Composite Index has pulled back to its lowest level since Jan. 31, dragged by six consecutive sessions of losses. The Nasdaq 100 Index, which comprised the biggest non-financial tech stocks, ended at its lowest since Jan. 16.
The ...