Illustration: Sarah Grillo/Axios
Rising U.S. bond yields again sent tech stocks tumbling on Monday, with the tech-heavy Nasdaq composite index falling into its third 10% correction in the last year.
Why it matters: With the real economy still depressed, especially the labor market, continued weakness in Big Tech and a deflating housing market could undercut the expected economic recovery.
- Both stocks and housing have been underpinned by historically low interest rates and inflation expectations, which now are jumping at the fastest pace in years.
What it means: Tech stocks have been incredibly volatile over the past year, rising and falling more than the rest of the market, as even trillion-dollar companies like Apple routinely see 3% and 4% daily moves.
The big picture: The exaggerated stock price moves in tech are amplifying overall market volatility, but that volatility bears watching because of the growing role tech plays in the U.S. economy.
- All five of the largest U.S. companies by market cap are in tech — Apple, Microsoft, Amazon, Alphabet and Facebook, in that order — and together they hold a market cap of more than $8.2 trillion.
- The entire S&P 500 has a market cap of $33.9 trillion, according to S&P Global, meaning the Big Five account for just under a quarter of the benchmark U.S. stock index's value.
By the numbers: On Monday, those five companies suffered an average share decline of 3%, led by 4% pullbacks in Apple and Amazon.
- Tech companies across the board have been stung by the selloff, with previous world-beating market champions including Tesla, Zoom, Nvidia, Square and AMD all down by 20% since Feb. 12, when the Nasdaq hit its last record high.
- Tesla is actually down by 35% from its last record high on Jan. 26, the third time in about a year it has lost close to a third of its value.
Between the lines: Despite all the talk of investors rotating from big, tech-heavy growth stocks to "cheaper" value stocks over the past month, the biggest beneficiaries of the rotation have been stocks with incredibly high forward price-to-earnings ratios like ExxonMobil (278.2 12-month forward P/E), Disney (60.2) and Mastercard (45.8).