Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Tech retakes market lead as investors eye yields, earnings

EconomyApr 18, 2021 09:10AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: A Wall St. street sign is seen near the NYSE in New YorkNYSE in New York

By Lewis Krauskopf

NEW YORK (Reuters) -U.S. technology and growth stocks have taken the market's reins in recent weeks, pausing a rotation into value shares as investors assess the trajectory of bond yields and upcoming earnings reports. Technology has been the top-performing S&P 500 sector in April, rising 8% versus a 5% rise for the benchmark index. Big tech-related growth stocks in other S&P 500 sectors such as Amazon (NASDAQ:AMZN) Inc, Tesla (NASDAQ:TSLA) Inc and Google-parent Alphabet (NASDAQ:GOOGL) Inc have also charged higher.

The gains have followed a months-long rotation in which tech stocks were outpaced by shares of banks, energy companies and other economically-sensitive names that have surged since breakthroughs in COVID-19 vaccines late last year. The increases in many of these so-called value stocks have slowed lately, while U.S. Treasury prices have come galloping back in April after a sharp first-quarter sell-off. This suggests that some investors may have already priced in a rapid growth spurt that is showing up in economic data. "Tech and growth has started to pick up a little bit because people are getting a little more cautious," said Lindsey Bell, chief investment strategist at Ally Invest. "Investors are in this wait-and-see mode ... at least until earnings get underway."

One of the key drivers of the move in tech has been the Treasury market, with the benchmark 10-year note yield falling about 15 basis points in April to about 1.6% on Friday.

Higher bond yields are particularly challenging for the performance of tech and other shares with high valuations and high expected future profits, as rising yields reduce the stocks' values in many standard models. The 10-year yield rose about 83 basis points in the first quarter.

"People are probably taking a little bit of a deep breath and saying, 'OK, maybe rates aren't going to go straight to (2.50%),'" said Chris Galipeau, senior market strategist at Putnam Investments.

Shares of tech and other companies with strong "stay-at-home" businesses could also strengthen if there are snags in the countrywide vaccination drive or other problems with the recovery, investors said.

For example, a call by U.S. health agencies this week to pause use of Johnson & Johnson (NYSE:JNJ)'s coronavirus vaccine spurred a move into some stay-at-home stocks and out of travel names tied to the economic reopening. Investors also pointed to the impending influx of quarterly reports as key to determining market leadership, with Netflix Inc (NASDAQ:NFLX) and Intel Corp (NASDAQ:INTC) among the major tech and growth company earnings due next week.

Many investors think the recent market shift is just a pause, with value and cyclical stocks due to regain command after years of lagging, as investors seize on shares expected to benefit most from what the Federal Reserve expects will be the strongest economic growth in nearly 40 years.

"My guess is we will see more of this internal rotation where growth takes a break and then it comes on and then value takes a break and then it comes on," Galipeau said. "It won't surprise me if that continues for a couple of years."

Others have become more wary of the equity market in general. Strategists at BofA Global Research recently issued a report listing five reasons for caution on stocks, including high valuations and outsized returns over the past year. The bank kept its year-end S&P 500 target at 3,800, some 9% below current levels. The index has risen 11% this year.

"Amid increasingly euphoric sentiment, lofty valuations, and peak stimulus, we continue to believe the market has overly priced in the good news," BofA's strategists wrote.

Tech retakes market lead as investors eye yields, earnings

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Keaboka Mogadime
Keaboka Mogadime Apr 18, 2021 2:24PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hoping nasdaq to go higher
Brendon Hosay
Brendon Hosay Apr 18, 2021 1:35PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you for your insight.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email