The largest outflow of funds in three and a half years! The test of the withdrawal of funds from US technology stocks may have only just begun.

Source: Wall Street

Overall outflows from US stock funds reached a weekly high of nearly $29 billion in more than three and a half years in the week ended Sept. 22, when investors withdrew $1.2 billion from technology funds for the first time in three months.

The recent highs of US Treasury yields have become an important factor affecting capital markets, triggering a sell-off in US stocks, especially technology stocks, and testing investor confidence in some popular technology stocks.

The yield on 10-year u.s. bonds rose above 1.5% for the first time in three months on Monday and hit a three-month high on Tuesday. The yield on 30-year Treasuries rose more than 9 basis points on Tuesday and hit a three-month high.

Technology stocks fell again and again in the first two days of the week, with the Nasdaq falling for three consecutive days, the biggest one-day drop in six months on Tuesday, and the biggest drop in more than four months, both by S & P, which fell by more than 2%. Commentators believe that the market generally expects the Fed to be more hawkish, believing that Federal Reserve Chairman Colin Powell hinted on Tuesday that the rise in inflation may be long-term and structural, and that the sharp rise in US bond yields contributed to the stock market sell-off.

When the U. S. stock market fell, popular technology stocks fell more prominently. Microsoft Corp、 Alphabet Inc-CL CParent companies Alphabet and NVIDIA Corp are both down more than 4% so far this week, making them a major driver of the decline in major u.s. stock indexes. On Tuesday, these three technology stocks and Apple Inc、 Amazon.Com Inc、 Facebook IncAnd Netflix IncIn total, the shares of seven technology companies have lost about $315 billion in market value, the biggest one-day drop since October.

Why are tech stocks so "hurt" by the rise in US bond yields?

Wall Street news articles earlier on Wednesday noted that fast-growing companies are more sensitive to interest rates than other companies because such companies usually have no revenue or profits for many years of operation, and when valuing stocks, analysts use bond yields to discount the future earnings of such companies to current amounts. The higher the yield on US debt, the lower the value of these companies' future earnings.

In a low-yield environment, investors are more willing to buy tech giant stocks that will bring huge profits in the future, and returns tend to rise because investors are more optimistic about the economic outlook. they are more willing to increase their holdings of companies that make more profits and improve shareholder returns during economic growth.

Recent data suggest that the challenges facing technology stocks may be just beginning.

Bank of America CorporationInvestors withdrew $1.2 billion from technology mutual funds and ETF in the week ended Wednesday, Sept. 22, the first such outflow in three months, according to EPFR Global. Overall outflows from US equity funds were close to $29 billion, the highest weekly level in more than three and a half years, reversing previous successive inflows.

Analysts believe the recent rise in US bond yields has subverted the perceptions of some investors who had expected yields to remain low and the market capitalization of technology leaders to continue to expand. When US bond yields rose at the start of the year, investors favored stocks in economically sensitive industries, and the so-called return-to-work trading boom waned this summer, with investors spending billions of dollars on technology funds. Recently, these funds that hold technology stocks have had to re-evaluate their bets on technology stocks.

Trust and investment company Glenview Trust Co. Bill Stone, chief investment officer, commented that when portfolio managers see Treasury yields rise, they turn to relatively cheap stocks, which is especially dangerous for those whose returns fall far short of expectations.

Shawn Snyder, head of investment strategy at Citi's US consumer wealth management, commented that many investors do not want to withdraw their positions, technology stock valuations remain high, and they are still at risk when yields soar. He advises clients to buy cheaper industry stocks, such as health care, but expects technology companies to continue to grow steadily.

Kirk Materne, an analyst at Evercore ISI, an investment bank, expects a "long-term fall" if 10-year Treasury yields continue to rise to 2 per cent for software stocks such as Perry Asana. Earlier this year, when the yield on 10-year Treasuries rose above 1.5 per cent, an expensive software stock index was hit hard: it fell 25 per cent in the three weeks since mid-February, it said.

Goldman Sachs GroupStrategists believe that in the current environment, short-term value stocks will not significantly outperform the market as they did at the beginning of this year, and should maintain long-term positions of high-quality long-term growth stocks because they are in a relatively less favorable period of economic growth.

There are risks in the market, so investment should be cautious. This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any comments, opinions or conclusions in this article are in line with their specific circumstances. If you invest accordingly, you will bear your own responsibility.