10-year Treasury yield climbs past key threshold, pulling tech stocks lower as investors reposition to sectors ‘better suited’ for economic reopening

Traders work on the floor of the New York Stock Exchange (NYSE) on December 07, 2018 in New York City
Traders work on the floor of the New York Stock Exchange (NYSE) on December 07, 2018 in New York City Spencer Platt/Getty Images
  • The 10-year yield rose beyond 1.6% following a sharp rise in the number of jobs added in the US in February. 
  • The 10-year yield’s rise reflects that the US is preparing to exit a “horrible time in our economy,” says one analyst. 
  • The Nasdaq lost more ground Friday after Thursday’s selloff. 
  • Visit the Business section of Insider for more stories.

Borrowing costs as implied by the 10-year Treasury note’s yield rose Friday following a strong February jobs report, with the increase putting further pressure on technology stocks that have leapt in value during the COVID-19 health crisis.

The 10-year yield ran up to 1.614% after the Bureau of Labor Statistics said US businesses added 379,000 payrolls last month, smashing through expectations for the addition of 200,000 payrolls.

The yield has strengthened this week, with a move beyond 1.5% on Thursday sparking a selloff in equities. The Nasdaq on Friday dropped 1.3% during the session, with electric vehicle maker Tesla down 6%, Apple off by 1.4% and Amazon lower by 1.2%.

The Nasdaq on Thursday erased gains for the year from its February 12 record close. 

The 10-year yield, which influences a range of lending programs, has quickly climbed from about 1% at the start of 2021, which appears to reflect a faster-than-expected availability of COVID-19 vaccines to the public, Jamie Cox, managing partner for Harris Financial Group, told Insider.

“This time last year, a lot of people rotated out of sectors which were going to be most harmed by the pandemic and bought technology because technology was the one sector that was probably considered to be defensive for the first time ever,” said Cox. “So it makes perfect sense that you would see a selloff in technology to restore positions back in places that are going to be a little bit better suited now that the pandemic is largely behind us.”

The US economy is moving further toward fully reopening and that “should continue to push Treasury yields higher and will present a headwind to those sectors that did so well last year like Technology, Communication Services and, to a lesser extent, Consumer Discretionary (particularly because of Amazon),” wrote Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, in a Friday note.

“I regard the rise in yields not as some pretense of hyperinflation,” said Cox. “It’s just a recognition that we’re getting ready to exit a very horrible time in our economy and interest rates should reflect that,” he said, adding that he expects the 10-year yield to begin to moderate by May and not move much beyond where it is currently.