Tech stocks are suffering huge losses, as rising bond yields continue to force investors to move out of technology sector and into other more economically sensitive sectors.
The Nasdaq 100 Index, heavily populated by tech and growth names, recorded a loss of $1.6 trillion in market value from high-priced technology stocks after three weeks of continuous decline, amid rise in U.S. Treasury yields which now sits at about 1.625%, up from 1% at the start of this year. The Nasdaq Composite ended the week with a decline of 1.9%, making it the longest streak of declines since September, over three times lower than S&P 500.
As a result, Tesla shares saw a decline of 3.6 percent on Friday, a drop of 32 per cent from its peak in January, losing around $263 billion in market value.
Experts worry the current decline could be longer-lasting, as expectations of a powerful U.S. economic recovery fuel a shift away from the online trades.
According to Refinitiv IBES, in 2021 profits for financials sectors are to jump 23% while industrials sectors are expected to rise 72%, compared to just a 15% rise for tech companies.
Despite all this, valuations in the technology sector remain well above average levels. At 26.6 times forward earnings, tech sector’s valuation is above five-year average of about 21. At its peak in 2020, forward earnings were 30 times.