CNBC’s Jim Cramer on Tuesday lamented the impact rising bond yields are having on the market, saying the move could narrow gains for tech stocks and reduce gains for the sector as a whole.
“If the bond market doesn’t start to move, or at least calm down, and long-term interest rates don’t stop rising, we’re going to start to lose the group that has been driving us up over the last few months,” he said. Said.
On some Wall Street, bond yields were on the rise after the US Federal Reserve (Fed) cut interest rates by a whopping 50 basis points (bp), signaling further rate cuts in the coming months. Some expected it to decline. Bond and stock markets are typically negatively correlated, with investors flocking to the latter when interest rates are low and the economy is strong, and to the former when interest rates are high and bonds appear safer than stocks.
The 10-year Treasury yield rose to its highest level since July on Tuesday. And while the Dow Jones Industrial Average underperformed, the Nasdaq Composite Index hit a new all-time high as investors awaited earnings from mega-tech companies.
Cramer said investors are being drawn back into tech stocks as rising interest rates complicate the growth story for this economically sensitive corner of the market. In recent months, investors had hoped that lower borrowing costs would help companies in the industrial sector and other housing-related sectors perform better, leading to higher stock prices. However, tech stocks are expected to benefit regardless of lower interest rates, as they focus on non-recurring themes such as artificial intelligence as the generative AI boom continues.
“If the[bond market]doesn’t stop falling, you’re going to start to question the idea that the Fed will continue to cut rates and deliver a great economy in 2025,” Cramer said.
