NEW YORK — US
technology and growth stocks have taken the market’s reins in recent weeks,
pausing a rotation into value shares as investors assess the trajectory of bond
yields and upcoming earnings reports.
اضافة اعلان
Technology has been
the top-performing S&P 500 sector in April, rising 8 percent versus a 5
percent rise for the benchmark index. Big tech-related growth stocks in other
S&P 500 sectors such as Amazon Inc,
Tesla Inc and Google-parent Alphabet
Inc have also charged higher.
The gains have
followed a months-long rotation in which tech stocks were outpaced by shares of
banks, energy companies and other economically-sensitive names that have surged
since breakthroughs in
COVID-19 vaccines late last year.
The increases in many
of these so-called value stocks have slowed lately, while U.S. Treasury prices
have come galloping back in April after a sharp first-quarter sell-off. This
suggests that some investors may have already priced in a rapid growth spurt
that is showing up in economic data.
“Tech and growth has
started to pick up a little bit because people are getting a little more
cautious,” said Lindsey Bell, chief investment strategist at Ally Invest.
“Investors are in this wait-and-see mode ... at least until earnings get
underway.”
One of the key drivers
of the move in tech has been the Treasury market, with the benchmark 10-year
note yield falling about 15 basis points in April to about 1.6 percent on
Friday.
Higher bond yields are
particularly challenging for the performance of tech and other shares with high
valuations and high expected future profits, as rising yields reduce the
stocks’ values in many standard models. The 10-year yield rose about 83 basis
points in the first quarter.
“People are probably
taking a little bit of a deep breath and saying, ‘OK, maybe rates aren’t going
to go straight to (2.50 percent),’” said Chris Galipeau, senior market
strategist at Putnam Investments.
Shares of tech and
other companies with strong “stay-at-home” businesses could also strengthen if
there are snags in the countrywide vaccination drive or other problems with the
recovery, investors said.
For example, a call by
US health agencies this week to pause use of Johnson & Johnson’s
coronavirus vaccine spurred a move into some stay-at-home stocks and out of
travel names tied to the economic reopening.
Investors also pointed
to the impending influx of quarterly reports as key to determining market
leadership, with Netflix Inc and Intel Corp among the major tech and growth
company earnings due next week.
Many investors think
the recent market shift is just a pause, with value and cyclical stocks due to
regain command after years of lagging, as investors seize on shares expected to
benefit most from what the Federal Reserve expects will be the strongest economic
growth in nearly 40 years.
“My guess is we will
see more of this internal rotation where growth takes a break and then it comes
on and then value takes a break and then it comes on,” Galipeau said. “It won’t
surprise me if that continues for a couple of years.”
Others have become
more wary of the equity market in general. Strategists at BofA Global Research
recently issued a report listing five reasons for caution on stocks, including
high valuations and outsized returns over the past year. The bank kept its
year-end S&P 500 target at 3,800, some 9 percent below current levels. The
index has risen 11 percent this year.
“Amid increasingly
euphoric sentiment, lofty valuations, and peak stimulus, we continue to believe
the market has overly priced in the good news,” BofA’s strategists wrote.
Read more business