SPAC, Hedge Fund, Growth Stock Pain Builds in $1 Trillion Rout

Casualties are piling up across the stock market as bond yields rise.

The Nasdaq 100, down for a sixth straight day, has lost nearly $1 trillion in value. Growth stocks, by one measure, are in the midst of their worst month since the dot-com days. Speculative areas of the market including SPACs and newly public companies are facing harsh blows. This all as benchmark 10-year Treasury yields have pushed to the highest level in a year.

“A confluence of events has triggered this mini tech wreck: Steady vaccinations, improving economic fundamentals, earnings upside, plus another fiscal stimulus around the corner,” said Mike Bailey, director of research at FBB Capital Partners. “The icing on the cake has been a surge in interest rates.”

Below is a sampling of pockets of the market getting hit hardest in the rate-induced selloff.

Heavy Rotation

Not everything was hit equally by rising rates and inflation expectations. Rather, underneath the equity market’s surface, a rotation was afoot from high-flying growth companies to beaten down value shares. As of mid-Tuesday morning, the S&P 500 Value Index was up 6.7% in February whereas its growth counterpart was trading lower -- the largest monthly spread in favor of value since December 2000.

Unlucky Timing

Investors who recently loaded up on technology shares are now feeling the pain as yields push higher. Over the past six weeks, a record $19 billion flowed into these funds, according to EPFR global data compiled by Bank of America Global Research. The S&P 500 information technology sector fell for a sixth straight day Tuesday, the longest losing streak since August 2019.