Technology stocks staged a comeback, helped by a barrage of good news. Even the 10-year yield climbing couldn’t put a brake in tech.
Notably, tech stocks rallied even as the 10-year U.S. Treasury yield climbed around nine basis points to 4.294%. Higher bond yields typically weigh down growth-focused tech stocks because they increase the cost of borrowing and lower the value of future earnings. But tech stocks defied that relationship Monday.
"As investors become more comfortable with a higher rate environment, yields on 10-year Treasuries may not need to fall back into the 3′s for longer duration assets to work," Goldman Sachs wrote."Indeed, yields on 10-year Treasuries ranged between 4.5% and 7% back in the late-1990′s in the years when the Nasdaq posted significant outsized gains ," the note continued.
. It said Federal Reserve officials are feeling less urgency to raise interest rates as inflation cools down. If true, that means it's unlikely yields will rise too dramatically, giving stocks more room to breathe. That's a big"if," however. The consumer and producer price indexes, coming out later this week, will put that hypothesis to the test.
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