Why has the stock market gone up today? Tech stocks are bought when rates fall.

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Equities rose significantly as bond yields halted and fell. Sectors benefiting particularly from lower rates responded with the largest gains.


Dow Jones Industrial Average

rose 188.11 points, or 0.55%, to close at 34,084.15. the

S&P 500

gained 43.44 points, or 1.06%, to end at 4,159.12, and the

Nasdaq Composite

climbed 236 points, or 1.77%, to close at 13,535.74. The biggest winner of the S&P 500 was the energy management company

Enphase Energy

(ticker: ENPH), which saw stocks jump 8.5%, benefiting from an analyst upgrade

SolarEdge Technologies


The 10-year Treasury yield ended at 1.63% after climbing to 1.68% on Wednesday after the Federal Reserve’s minutes were released. Central bank board members discussed the reduction of the bond purchase program. This would lower bond prices and increase their yields, as economic demand and inflation potentially force the Fed to change its policy. Higher bond yields reduce the present value of future cash flows, pushing stock valuations down. Falling yields on Thursday made investors more comfortable buying stocks, even those of still growing companies.

The biggest stock winners have confirmed this. Tech and biotech companies saw their stocks outperform,

Nasdaq 100,

a large-cap growth equity index, up 1.9%; the top two index winners were Chinese internet technology company NetEase (NTES) and vaccine maker Moderna (MRNA). Apple (AAPL) and


(MSFT) were the biggest and third largest winners of the Dow, respectively. Changes in rates disproportionately affect growth stocks because the companies they represent expect most of their profits to occur far into the future, and higher rates erode the value of those flows. future cash flow.

Thursday was “your classic rates go down, buy the tech,” Peter Boockvar, chief investment officer of Bleakley Advisory Group. Told Barron’s.

But stocks in sectors generally viewed as defensive in a volatile market also posted strong gains. the

Vanguard Consumer Staples

ETF (VDC) saw its shares rise by 0.80%, and the

Select Sector SPDR Utilities

ETF (XLU) rose 0.87%. Large-cap defensive companies’ earnings are generally stable despite the economic outlook; their stocks often underperform when bond yields rise, which means stronger economic demand. Additionally, rising yields make dividend yields on defensive stocks less attractive, so when rates fall, this group can perform well.

Boockvar of Bleakley Advisory said he owns Coca-Cola (KO) and

General Mills

(SIG) for customers, values ​​which increased by 0.89% and 0.48% respectively. Their dividend yields are 3.1% and 3.2% respectively.

Of course, jobless claims have been better than expected, but investors are now likely to interpret strong economic data as negative for equities, as it will reinforce the rhetoric that inflation is there, forcing the Fed to back out. hand.

“If you get a huge [datapoint] beat, that’s just gonna intensify the discussion on typing / not typing [Fed reducing bond buying or not]Said Boockvar.

Going forward, investors should watch the 10-year Treasury yield to see if it exceeds 1.74%, Tom Essaye, founder of Sevens Report Research wrote in a note. This is the bond’s recent closing high, “and if the 10-year yield breaks those levels, we can expect it to become an additional headwind on equities,” Essaye wrote.

Write to Jacob Sonenshine at [email protected]

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