February 4 (Reuters) Tech and growth stocks surged on Friday as investors took note of the impressive results from Amazon.com Inc against an unexpectedly robust U.S. employment number that led Treasury yields up.
The Nasdaq Composite index (.IXIC) is a significant source of tech and other growth stocks. It was up 2 percent per day following the historic fall in the shares that belong to Facebook, its owner Meta Platforms (FB.O), wiped $200 billion off its market value. Overall, the company was also a drag on the market as its results disappointed Wall Street.
The shares of Amazon enticed investors by increasing the Prime subscription price was recently up more than 15%, and on the course, it increased the value of its stock by over $200 billion.
Shares of the social media company Snap Inc (SNAP.N) increased by over 50% after falling by about a quarter during the prior session.
The fourth-quarter earnings season has been a mixed one for tech and growth companies which has seen bitter disappointments from companies like Meta, the streaming company Netflix as well as the fintech PayPal (PYPL.O), somewhat offset by the positive performance that came from Amazon, Apple (AAPL.O) and Microsoft (MSFT.O).
Although many of the significant tech-focused stocks are considered to be a single collection, “the divergence between Amazon and Meta Platforms’ earnings is an important reminder that every company is distinct and has unique challenges and opportunities,” said Julian Koski, a chief investment officer of New Age Alpha, an asset management company New Age Alpha in a note to investors.
“The most desirable stock options provide the expected growth by their price regardless of what class or group the stock could be in,” he said.
Investors also digested the strong jobs report on Friday, which led to a spike in Treasury yields, which reached their highest levels in over two years. The higher products can weigh on growth stocks because they can reduce the value of firms with future earnings.
Recent gyrations have drawn retailers. The net purchase of Meta’s shares from retail investors reached $231 million, the highest level in three years, in the estimation of Vanda Research, marking it the third-highest day of net purchases since January 2014.
Divergent earnings from mega-cap growth stocks are fueling extreme swings in equity prices. They could trigger more volatility in the wake of the sharp fall last month as investors are becoming more discriminating about the stocks they select.
Many investors started reducing their holdings in tech stocks long ahead of the time that earnings seasons began. The future earnings growth that the sector promises loses its appeal once central banks increase rates, which increases the immediate financial benefits of holding risk-free government bonds.
Some banks have been shifting portfolios toward profitable stocks when bond yields and inflation increase, like miners, banks, insurers, and oil companies, for years after when the U.S. Federal Reserve flagged that it was going to raise rates starting next month.
“A tightening Fed generally means lower returns and plenty of uncertainties for equity markets,” analysts at Morgan Stanley posted on their website Friday. The bank stated that they “remain the biggest sellers of rallies” and believe that the S&P 500’s value is more like 4,500. The benchmark index recently was in the range of 0.9 percent to 4,181.
However, some do not believe that the more extensive view of technology stocks isn’t harmful.
“Overall, the outlook for earnings remains positive with the global technology sector expected to increase 15 percent,” wrote Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, in a note to customers.
“In our initial scenario, we believe that valuations will remain stable and for high mid-teens growth in earnings to be seen in the share price in the coming 12 months.”