The eight-day technology rally is running into a dual headwind of higher bond yields and profit-taking, with valuations on long-duration growth assets increasingly exposed as discount rates move against them.
Patrick Munnelly at Tickmill Group said the Federal Reserve's hawkish shift and sticky services inflation are offsetting the tailwinds from lower oil prices and geopolitical relief that helped propel the rally. "Valuation support becomes more fragile when bond yields rise and investors have already crowded into the same winners," he said.
Semiconductors are identified as the most vulnerable pocket, where concentrated positioning amplifies the risk of a sharper unwind if yields continue to rise.
The dynamic is not confined to any single market: the repricing of Fed expectations is flowing through equities and commodities globally, adding a structural dimension to what began as a positioning-driven rally.
[THIN SOURCES, editor review]
