Recent inflation figures are reviving a familiar tech trade!
Tech stocks are soaring and bond yields are falling. Several of the FAANG stocks jumped. The Nasdaq ripped higher, gaining more 6% in recent trading. The ARK Innovation ETF was up 13%. Investors are also tempering their interest rate bets.
Tweet on reaction towards cooling inflation
Stocks Leap in Midday Trading After Cool CPI Report!
U.S. stocks charged higher in midday trading.
The benchmark S&P 500 added 4.4% in early afternoon action. The blue-chip Dow industrials rose 2.8%. The Nasdaq Composite surged 6%. Via @FactSet pic.twitter.com/pIJtxDiTl5
— The_Journalbiz (@the_journalbiz) November 10, 2022
FactSet Chart on market reaction after inflation eases
Technology stocks have been at the center of the volatility that has swept global markets this year. To some investors, it’s just the beginning of the big swings.
The so-called FAANG stocks have lost trillions of dollars in market value. Rising bond yields and sky-high inflation have sent the S&P 500’s information technology sector toward its worst year relative to the broad index since the early 2000s. That plunge has left some investors wondering if it’s time to buy tech shares again.
Today, investors piled into the trade once again after inflation data came in better than expected. Bond yields fell and tech stocks soared. Zooming out, what’s ahead for tech after the volatile year?
These were wildly popular trades in recent years but have been crushed in 2022 because of high inflation. They have tended to roar back from time to time this year
Most of the time, investors have found themselves disappointed. The Federal Reserve has kept reaffirming its commitment to raising interest rates and inflation figures have kept coming in higher than expected.
That has led to an even bigger selloff in technology stocks and Treasury prices, sending yields higher throughout the year and causing pain for investors who piled into the trades.
The October inflation report is likely to keep Federal Reserve officials on track to approve a half-percentage-point interest-rate increase next month, even as they pencil in slightly higher rates for next year than they had anticipated previously.
The Fed approved last week its fourth consecutive rate increase of 0.75 percentage point, raising the benchmark federal-funds rate to a range between 3.75% and 4%.