This morning the tech-heavy Nasdaq Composite index is off 2.34% after falling yesterday. Shares of Tesla are off more than 6% today, now mired in a bear-market correction after reaching new all-time highs earlier this year. Apple stock is worth $122.02 per share, down from over its recent highs of more than $145.
After a long period of time when it felt like tech stocks only went up, the recent correction is starting to feel material.
There are other ways to measure the selloff. Bessemer’s cloud index is off 4.5% today, after falling over 5% yesterday. And the now-infamous $ARKK, or ARK Innovation ETF that many investors have used as a proxy for growthy-tech stocks, is off 6.6% today after falling 5.9% yesterday.
Hell, even bitcoin has taken a pounding in the last few days, after its recent, relentless rise.
What’s driving the rapid turn-around in the value of tech companies, tech-focused indices, and tech-adjacents, like cryptocurrencies? Not merely one thing, of course, in an environment as complex as the world’s capital markets. But there is a rising narrative that you should consider.
Namely that the money-is-cheap-and-bond-yield-is-garbage-so-everyone-is-putting-money-into-stocks trade is losing steam. As some yields rise, bonds are become more attractive bets. And as COVID-19 vaccines roll out, some investors are pushing their stock-market bets into categories other than tech.
The result is that the landscape of value is shifting; the winds that were at the back of every tech company are receding, at least for now. If the changed weather persists until the very investment climate that tech stocks exist in reaches a new equilibrium, we could see the appetite for tech IPOs lessen, late-stage private valuations for startup shares dip, and more.
Here’s CNBC from earlier today on what’s changing:
Stocks dropped again on Tuesday as tech shares continued to tumble in the face of higher interest rates and a rotation into stocks more linked to the economic comeback.
Here’s the Wall Street Journal on the same theme, from yesterday:
The lift in yields largely reflects investor expectations of a strong economic recovery. However, the collateral damage could include higher borrowing costs for businesses, more options for investors who had seen few alternatives to stocks and less favorable valuation models for some hot technology shares, investors and analysts said.
And here’s Barrons from this morning, noting that what we’re seeing at home is not merely a US-issue:
While members of the NYSE FANG+ index including Tesla, Facebook and Apple have dropped sharply as the yield on the 10-year Treasury has climbed, the sector also is on the retreat overseas.
The market could snap back. Or not. It’s worth watching stocks for the next few days.