NEW YORK, Sept 30 — Surging bond yields are rattling US stocks, and some investors worry the richly valued shares of giant technology and growth companies may be another weak spot.
Their rising stock prices ballooned valuations, however, and some investors say the megacaps could be vulnerable if climbing bond yields keep pressuring stocks. “When the big tech stocks start going down ... the indexes go down,” said Matt Maley, chief market strategist at Miller Tabak. “Then people get nervous and sell their mutual funds or their ETFs, and ... the whole thing snowballs.”
Shares of tech and growth companies, which often have significant expected profit growth in the years ahead, tend to be hit particularly hard when yields rise because their future projected earnings are discounted more severely. Still, strategists point out that the rise in implied volatility for tech stocks is no more than for the broader market. That sense of complacency makes tech stocks vulnerable to increased volatility should market declines accelerate from here, said Chris Murphy, Susquehanna Financial Group co-head of derivative strategy.