Infotech

Tech, collateral victim of the rise in interest rates



Posted on Feb 23, 2019 2021 at 16:57Updated Feb 23, 2019 2021 at 17:48

Big winners in recent years, technology stocks are now struggling on the stock market. The Nasdaq, with strong technological coloring, accuses the blow, with a fall of up to 3.7% shortly after the opening of the American markets on Tuesday. The day before, it had fallen by nearly 2.5%. In its wake, the S&P 500 fell 0.7%. The main US index has chained five consecutive sessions of decline, its longest series of underperformance since the panic last March. The Nasdaq has fallen more than 5% since its record on February 12, driven by the decline of tech giants. Apple has lost around 15% since the end of January despite record results in 2020.

The weakness of tech on the stock market coincides with the rise in long-term interest rates. In the United States, the 10-year rate is at its highest in just over a year, at 1.37%, after having jumped more than 46 basis points this year. It is not a coincidence. Low interest rates have long served as the rationale for historical peaks in stocks. In particular, investors have snapped up tech stocks in recent years, a trend that has accelerated since the Covid crisis. As a result, the sector’s valuation breaks the ceiling, with a price-earnings ratio (PER) twice as high on the Nasdaq than on the S&P 500.

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