Wall St Week Ahead Soaring U.S. tech stocks leave some investors doubtful rebound will last

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Hopes that inflation is subsiding are fueling a surge in battered technology and megacap stocks, though some investors believe still-high valuations and doubts over the companies' earnings outlooks may make a sustained reversal elusive.

Tech and tech related companies that represent less than one-fifth of the S&P 500 have so far accounted for over half of the negative profit revisions for the fourth quarter, according to Credit Suisse.

One key factor is whether Treasury yields, which move inversely to prices, continue this week's stunning decline. Higher yields can weigh heavily on tech and growth stocks, whose valuations tend to be based heavily on future profits that are discounted more severely as yields go higher. King Lip, chief strategist at Baker Avenue Asset Management, described Thursday's CPI news - with the annual increase below 8% for the first time in eight months - as a "big deal." If bond yields continue to fall, "the pace at which people are reducing their exposure to these large-cap tech names is going to slow down," he added.

 

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