Apple and other tech stocks have had a rough start to 2022. They could still be good picks.
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Tech stocks are getting slammed yet again, for familiar reasons. Investors can blame worries about higher inflation, expectations of tighter monetary policy from the Federal Reserve, and—more recently—a serious spike in bond yields.
futures, which track the largest constituents in the tech-heavy
index, indicated a 1.6% tumble at the open Tuesday. Familiar names like
(TSLA) were all down in the premarket trade, falling 1.8%, 1.9%, and 2%, respectively.
Against a backdrop of historic inflation—the U.S. consumer-price index rose in December at the fastest annual rate since 1982—investors are getting concerned about just how early, and fast, the Fed will raise interest rates. Markets had priced in three rate increases in 2022—with the first in March—but noise is growing that more or bigger increases may be on the horizon.
Billionaire hedge fund investor Bill Ackman has called for a “shock and awe” approach from the central bank, with a greater-than-anticipated 50 basis-point hike in March. JPMorgan Chase (JPM) boss Jamie Dimon sees six or seven rate increases coming this year.
This is all feeding into a significant spike in bond yields. The yield on the benchmark 10-year U.S. Treasury note is at its highest level since January 2020, touching 1.84% Tuesday before settling closer to 1.82%. It ended last week at 1.79%, and began the year at 1.53%.
None of this is good for stocks, especially tech stocks. The valuations of many high-growth…