Market Herald logo

Subscribe

Be the first with the news that moves the market
  • U.S. tech stocks rallied on Tuesday, driving the NASDAQ up roughly four per cent to regain some of the losses seen the day before
  • Tesla soared almost 20 per cent, marking its biggest daily climb in more than a year, while Amazon and Microsoft posted their biggest daily gains in five weeks
  • Many tech champions have slumped over the last few weeks as rising yields gave way to concerns over their high valuations
  • Rising interest rates usually hurt high-growth tech companies since their value is based largely on future earnings rather than profits earned in the short term
  • A shift is now beginning to emerge from “stay-at-home” winners, like Amazon, to companies positioned to benefit from the economy’s reopening

U.S. tech stocks rallied on Tuesday, driving the NASDAQ up roughly four per cent to regain some of the losses seen the day before.

Tesla soared almost 20 per cent, marking its biggest daily climb in more than a year, while Amazon and Microsoft posted their biggest daily gains in five weeks.

According to Refinitiv data, traders exchanged nearly US$43 billion (roughly A$55.73 billion) worth of Tesla shares, more than any other stock and almost triple the second most-traded company, Apple.

Many tech champions have slumped over the last few weeks as rising yields gave way to concerns over their high valuations.

Reports that a US$1.9 trillion (roughly A$2.46 trillion) coronavirus relief package was nearing final approval ignited a spark in yields on Monday, which pushed the tech-focused NASDAQ to more than 10 per cent below its February 12 high.

Kristina Hooper, chief global market strategist at New York-based Invesco, said the market is now adjusting to the new level in interest rates.

She added that small stocks and companies whose products and services are in demand during a strong economy — known as cyclicals — are expected to outperform this year.

Rising interest rates usually hurt high-growth tech companies since their value is based largely on future earnings rather than profits earned in the short term.

“Potential headwind for the market is (when) interest rates rise further from this point over the short period … since they have risen too fast in too little time,” said Michael Sheldon, chief investment officer at RDM Financial in Westport, Connecticut.

With the rise in Treasury yields, a shift is beginning to emerge from “stay-at-home” winners, like Amazon, to companies positioned to benefit from the economy’s reopening, like those related to finance, restaurants and travel.

More From The Market Herald

" China and France criticise AUKUS agreement

Chinese and French foreign ministries discredit the AUKUS deal, accusing the allies of being secretive the…

" Brazilian policy makers celebrate laws in favour of coal despite climate concerns

Brazil has unveiled an extension to its coal shift until 2040 under a new "just energy…

" South African Omicron research suggests hospitalisation risk less than Delta

South African research suggests the Omicron variant may not be as severe as Delta, but the…

" Australia joins diplomatic boycott of Beijing Olympics amid human rights concerns

Australia followed the US in a formal boycott of the February 2022 Beijing Olympics amid concerns…