Here's why tech stocks are tumbling as the Fed prepares to hike interest rates.



The index fell more than 3%.

Andrew Burton is a photographer.

Tech stocks took a beating on Wednesday, with the Nasdaq 100 falling 3.12% in its worst day since March. Many are wearing red.

Tech stocks are falling hard. Is it rising bond yields, expectations for strong growth, or all of the above? We will try to explain.

The market was juiced by central banks in 2020.

It's important to understand why tech rocketed to begin with. When coronaviruses hit in 2020, central banks slashed interest rates.

The yield on bonds cratered so investors started looking for other returns. The so-called stay-at- home stocks like Apple and Amazon were in demand as banks, energy companies and the like were in a rut.

Borrowing was cheaper than ever. Why not bet on tech companies that might be the next big thing?

Almost all of the calculations have changed in a year.

It's bad news for tech that bond yields are rising.

The Fed signaled last year that it will raise interest rates in 2022, and has already started slowing bond purchases, as it tackles the strongest inflation since the 1980s.

The release of minutes from the Fed meeting in December was the cause of Wednesday's sell-off. They said officials are weighing up moving faster than they had thought, sending investors into a panic.

The investing chief of a firm that handles nearly $30 billion in assets says that 6 stocks are the favorites in the stock pickers' market in 2022, though an overlooked risk could rattle markets.

Tech stocks are hurt by rising interest rates and higher bond yields.

Many technology companies are unprofitable. If bond yields go up, investors will lose out on returns in the here and now because they will hold tech companies that will only start earning properly in the distant future. That makes them look less appealing.

Higher interest rates are good for the financial sector. Over the last few months, banks have done well, drawing investors away from tech.

The growth is expected to stay strong.

The US and global economy are expected to be strong in 2022.

The US jobs data from the private company came in better than expected. The Omicron coronaviruses variant tearing across the US seems to be milder than previous versions.

During the worst of the swine flu, investors dumped airlines, restaurants, hotels and other companies in favor of stay-at- home and speculative tech stocks, and now they are returning to those companies because of the prospect of a strong economy.

Inflation is still going on.

Inflation is expected to remain strong in 2022. It makes it more likely that the Fed will raise rates, and it also makes buyers look for companies that can ride out the storm.

Instead of flashy tech names, investors are looking for firms that can successfully raise their prices, such as luxury consumer brands. Real estate and energy are sectors that usually fare well during times of inflation.

Some tech companies are better than others. Analysts think that Apple, Amazon and other tech companies will fare better in the future than unprofitable ones.

Business Insider has an original article.