(Bloomberg) -- The rout in technology shares sent the Nasdaq 100 Index toward a correction as investors fled stocks that powered last year’s pandemic-induced rally.
The gauge, heavily weighted toward the biggest tech companies, slid as much as 2% as of 1:18 p.m. in New York, bringing its loss since a Feb. 12 record to 10%. Tesla Inc., Peloton Interactive Inc. and Zoom Video Communications Inc. are among members that have lost at least 20% in that span. The Nasdaq 100 is now 3.3% lower for the year after rising as much as 7.1%.
The gauge is suffering as investors ditch companies that thrived in the work-from-home era in favor of last year’s laggards, betting that vaccinations will end Covid lockdowns and fuel economic growth that aids cyclical stocks. The latest bout of weakness came after a spike in yields raised concern that companies trading at high valuations because of their potential to grow earnings may have trouble living up to expectations if borrowing costs surge.
“We’ve seen the overvalued megacap tech space assume the brunt of the weakness here,” said Candice Bangsund, portfolio manager of global asset allocation at Fiera Capital. “These sectors are having more trouble digesting the environment of higher bond yields.”
The correction in the Nasdaq 100 -- typically defined as a 10% pullback from a peak -- comes as investors scale back bets on the market’s speculative fringes. The mania in special purpose acquisition companies is showing signs of hitting a saturation point, with an index tracking blank-check flyers down about 21% from its peak. Cathie Wood’s flagship exchange-traded fund, the Ark Innovation ETF, has gone negative for the year and is now 25% below its all-time high on Feb. 12.
“It’s kind of been the reverse of what we saw over the summer,” said Matt Stucky, portfolio manager at Northwestern Mutual Wealth Management Co. “Some of the biggest tech companies are certainly under pressure and a lot of that has to do with the backup of long-term interest rates and what that means for longer duration equities.”
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