Nasdaq 100 Index Notches Gain After Worst Week Since October

The Nasdaq 100 Index rebounded Friday but still capped its worst week in nearly four months as a spike in U.S. Treasury yields triggered a selloff in big technology stocks that have skyrocketed during the pandemic.

The selling eased on Friday in New York with contracts on the benchmark gaining 0.6%. At one point this week the tech-heavy index accumulated a 6% drop -- its worst in almost a year -- as investors sold companies with high valuations, such as Facebook Inc., Apple Inc. and DocuSign Inc.

The so-called megacaps and other tech stocks mostly rose on Friday, with analysts and investors saying the longer-term outlook for stocks remained largely intact after the bruising selloff. Semiconductor stocks Micron Technology Inc., Applied Materials Inc. and Xilinx Inc. were among those that led the index’s advance on Friday.

“On balance, the investment case for equities is still OK, but not spectacular,” said Joseph Little, global chief strategist at HSBC Asset Management.

Investors grappled with implications of higher borrowing costs and inflation expectations. The speed of the jump in Treasury yields has caught investors by surprise, with many drawing comparisons to the 2013 taper tantrum -- a market rout fueled by concern the Federal Reserve would curtail stimulus.

Still, there was no shortage of investment strategists reminding clients that faster economic growth is a bullish driver for stocks while bond yields remain low compared with historical standards.

Nasdaq 100 Index Notches Gain After Worst Week Since October

The S&P 500 Index dropped 2.5% this week in its first week of back-to-back losses since October. One indication that the mood is still jittery: the Chicago Board Options Exchange Volatility Index hovered near 28, a relatively high level.

“It’s not the absolute level, but the rapid pace of increase that worries risk investors,” said Ipek Ozkardeskaya, a senior analyst at Swissquote. “We know that soaring yields are no good for the economy.”

Benchmark 10-year Treasury yields were around 1.4% on Friday, falling after Thursday’s jump. Outside of the U.S., markets were firmly risk-off. Equity benchmarks in Asia lost more than 3%, while investors sought a haven in the dollar.

“We do not expect the rise in yields to derail the equity rally,” Mark Haefele, chief investment officer of UBS Global Wealth Management, said in a note.

©2021 Bloomberg L.P.

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