U.S. stocks continue to fell sharply as a surge in bond yields prompted investors to dump risk assets, especially high-flying technology stocks. The major averages tumbled to their session lows as the 10-year Treasury yield soared to 1.494%, its highest level since February 2020.
The tech-heavy Nasdaq has dropped 4.8% this week, on pace for its second weekly loss in a row. Consumer discretionary and info tech are the two biggest losers among 11 S&P 500 sectors, falling 4.7% and 3.8%, respectively.
Companies with high long-term growth prospects are especially sensitive to interest rates, which erode the value of future cash flows and growth companies expect to see a large share of their profits farther into the future than more mature business.
Stocks still look relatively attractive versus bonds; the real Treasury yield—or the yield minus expected inflation—is still negative, at minus 0.75%. That means the 10-year Treasury bond loses value against inflation, which makes owning riskier assets like stocks more appealing. But investors are worried that safe bonds are becoming more attractive than they had been, as the real yield has moved closer to positive.
