Could Tech Stocks Break if Yields Continue to Rise From Here?

investing.com:

The Nasdaq 100 has been able to hold its own relatively better than many other global indices so far this week. The big technology stocks have been able to hold up the market, while small- and medium-caps have sold off.

Some investors perhaps view technology behemoths as haven assets, which may explain their outperformance. But with overstretched valuations, coupled with growing worries about the health of the global economy and still-rising government bond yields, I am not so sure how long they will be able to hold up the market.

Monday’s slightly higher close for the Nasdaq and S&P 500 may have been helped by relief after the US Congress agreed on a stopgap spending bill to avoid a government shutdown until November 17^th.

But with the bond market resuming its sell-off, this is likely to further support the dollar and undermine equities. In other words, nothing has changed since last week. Sentiment remains cagey with investors showing no desire to hold onto any gains. Investors are clearly not impressed by the latest kicking of the can down the road in so far as US debt deal is concerned.

So, the focus is likely to remain on factors that had weighed on markets last month, namely, rising bond yields and a strong dollar. This morning saw the benchmark US 10-year hit a new 2023 high as it continues to ascend towards the 5% level. Monday’s strong ISM manufacturing PMI data has further supported yields and fuelled the dollar index rally, now up for the 12^th week.

There will be lots of key U.S. data to look forward to this week, which should keep the dollar and bond yields in focus, which in turn should influence the stock markets. For as long as bond yields are rising, this should keep equities under pressure.

Faced with