Tech Stocks Look Unstoppable Again. How They’re Defying Fed Rate Hikes.

Stocks are facing a "real" yield problem as investors become more focused on rising real yields, which could result in lower stock prices and a hit to the P/E multiple.

The recent rise in interest rates is causing credit to become more expensive and harder to obtain, which will have significant implications for various sectors of the economy such as real estate, automobiles, finance/banks, and venture capital/tech companies. Rising rates also affect the fair value of assets, presenting both opportunities and risks for investors.

Hiking interest rates can discourage innovation and curtail long-term economic growth potential, according to a study presented at the Federal Reserve's annual conference. A percentage point increase in interest rates could lead to a 5% reduction in economic output, suggesting the need for increased government funding for innovation to offset rate increases. Higher interest rates make borrowing more expensive, reducing consumer and business demand and hindering the development of new offerings and efficiency-increasing innovations. Additionally, research and development spending, venture capital investment, and patents all decline with rising interest rates. However, the study does not advocate for refraining from raising rates if needed to control inflation.

Tech stocks may face challenges in the second half of the year despite recent inflows, as central bank liquidity decreases and investors shift from equities to bonds.

Investors expecting a continued surge in technology stocks due to enthusiasm over artificial intelligence may face trouble as central banks tighten monetary policy, according to Bank of America strategists. The correlation between central bank liquidity and tech stocks is a cause for concern, as central bank balance sheets have shrunk while the Nasdaq continues to climb, indicating potential risks ahead.

Tech shares boosted U.S. stock indexes despite higher yields on Treasurys, with investors scaling back on bets for interest-rate cuts due to the strong U.S. economy.

Tech stocks led a rally in the stock market, with the Nasdaq Composite gaining 1.6% and the S&P 500 ending a four-day losing streak, despite the rise in Treasury yields; investors will be looking for clues about the US consumer spending and the economy as retailers' earnings reports are expected, and Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole symposium is anticipated for indications on interest rates.

Tech stocks are exhibiting sell signals similar to previous market turning points, with valuations reaching unsustainable levels, a yield curve inversion indicating trouble ahead, and government funding and inflationary expectations creating economic challenges for long-duration assets.

Tech stocks are expected to continue their rally as a surge in spending on AI is anticipated to ease concerns about interest-rate hikes by the Federal Reserve.

Higher interest rates are impacting corporate profits, but stock prices remain steady for now.

Fund manager Kimberly Scott believes that elevated interest rates are presenting a significant challenge for equity investing and the economy, but she still sees value in mid-cap growth stocks and has identified six companies that she finds attractive in the current market conditions, including The Trade Desk, MSCI, Microchip Technology, Trex, and Pinterest.

The top 25 stocks in the S&P 500 outperformed the index in the 35th week of 2023, with tech stocks leading the way, suggesting a return of bull markets and a decrease in recessionary fears; however, market health, the balance between developed and emerging markets, and investor behavior still need to be addressed. Additionally, market correlations have dropped since COVID, and on "down-market" days, correlations are 5% higher than on "up-market" days. Market correlations also decrease during upward economic cycles. Retail investors are showing a preference for dividend-driven investing and investing in AI stocks. The global subsidies race is impacting valuations in tech and leading to supply chain inefficiencies. As a result, there are opportunities for diversification and investment in a wide variety of equities and bonds.

The rally in technology stocks in 2023 may be in trouble, signaling a potential downturn for the sector.

The US economy is facing a looming recession, with weakness in certain sectors, but investors should not expect a significant number of interest-rate cuts next year, according to Liz Ann Sonders, the chief investment strategist at Charles Schwab. She points out that leading indicators have severely deteriorated, indicating trouble ahead, and predicts a full-blown recession as the most likely outcome. Despite this, the stock market has been defying rate increases and performing well.

Long-term borrowing rates and riskier growth stocks of the Big Tech universe have increased simultaneously, potentially indicating investors' anticipation of a more enduring high-pressure economy.

A period of higher interest rates won't derail the bull market in stocks, as historical analysis shows that the stock market performs well during elevated interest rate periods, with slightly lower but less volatile returns compared to lower interest rate periods, according to BMO's chief investment strategist Brian Belski.

Higher interest rates have historically correlated with lower market returns, but new research from BMO Capital Markets suggests that the impact of higher rates on the S&P 500 is overblown, as returns tend to be slightly below average but with lower volatility; BMO recommends buying 28 stocks with low leverage and high free cash flow to benefit from this strategy.

Stock futures rise slightly as Wall Street awaits Federal Reserve decision on interest rates, with Instacart, Ford, Goldman Sachs, Intel, and more among the top movers.

The Federal Reserve plans to continue reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities, which will have an impact on stock markets, while keeping interest rates at current levels due to the lagged effect of monetary policy and the need for the commercial real estate market to adjust; however, there are concerns about the impact of tighter credit conditions on hiring and an increase in strikes, particularly in the auto industry. Elevated interest rates will pressure dividend-income investors and affect Real Estate Investment Trusts (REITs), while the reduction of securities by the Fed may lead to a decline in stock indices. The Fed is considering raising rates in November or December but is uncertain about how long rates will remain at current levels. The core personal consumption expenditure is falling, and rising energy prices are increasing overall inflation, but the Fed is excluding energy prices due to volatility and suggests that high oil prices may impact its stance in the future. Stock market traders have a short-term time frame and may find instruments like Instacart (CART) and Arm (ARM) more suitable, while long-term investors should prepare for the market adjusting to the Fed's restrictive policy by moving capital gains into money market funds, considering energy stocks at lower prices, and being cautious of high-flying technology stocks and IPOs.

U.S. stocks slumped after the Federal Reserve indicated that it may not cut interest rates next year as much as initially expected, causing concerns among investors on Wall Street.

The Federal Reserve's plans for prolonged elevated interest rates may continue to put pressure on stocks and bonds, although some investors doubt that the central bank will follow through with its projections.

Tech stocks led a retreat on Wall Street as investors were concerned about the Federal Reserve's hawkish stance and its decision to keep interest rates steady, causing the S&P 500, Dow Jones, and Nasdaq Composite to decrease; Goldman Sachs has delayed its forecast for a Fed rate cut to the fourth quarter of 2024.

Big Tech stocks, driven by the promise of artificial intelligence, are experiencing a slowdown in their massive rally due to the Federal Reserve's indication of a restrictive monetary stance, causing declines in some tech giants' stock prices.

Stocks tumbled after the Federal Reserve announced that interest rates will remain higher for longer; however, some analysts believe that the market's reaction was overblown and that higher rates and economic growth could actually lead to higher stock valuations.