Big tech and bond yields

While Tuesday’s near-2% drop in the NASDAQ 100 has been pinned on the rise in US government bond yields that followed Treasury Secretary Yellen’s comments about the potential need for tighter Fed policy, the tech-heavy stock market index had already been faltering in the days before she spoke. In our view, a more likely culprit for the retreat in the index was profit-taking after a recent strong run and the release last week of some consensus-beating earnings results for Q1. Our sense is that it won’t mark the start of a deeper, broad-based sell-off in the stock market, even as there is a further rotation away from the tech sector partly in response to even higher Treasury yields.