Oct 27, 2023

Higher yields continue to weigh on the Nasdaq 100 index of tech stocks.

nas100-chart

NAS 100: Daily Chart

The NAS 100 suffered a two-day slump in price and hit support at 14,242 on Thursday. There is still a gap below on further weakness, while a bounce here would have 14,800 as key resistance.

US 10-year treasury yields were -0.85% lower in early Thursday trading but have been trading near recent highs, which are also the highest levels since 2007. Increased borrowing rates are hurting tech valuations, while investors worry about the damage to companies from higher rates.

Even Sweden’s central bank reported a $7 billion hole in their finances due to bonds that went sour after a decade of ultra-low rates. The bank is now asking the government for 1% of its GDP to plug the gap. It was also higher rates that caused the Silicon Valley Bank collapse in March.

Earnings were mixed for tech giants this week, with a strong showing from Microsoft’s Azure cloud and hopes for AI growth. Its rival Google didn’t follow with slower cloud performance. Meta gave some hope that advertising revenues were sturdy enough but also struggled with cloud earnings.

Stocks were also under pressure from Middle East tensions after news that Israel conducted a limited tank incursion into Gaza before pulling back. The markets are waiting for Israel’s all-out ground invasion, which could spark an expansion of the war, and it was rumoured they are waiting for US equipment to arrive.

GDP growth and durable goods orders were also stronger than expected, which means the Federal Reserve is under no pressure to lower rates anytime soon.

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