Tech stocks manage modest rally after lackluster US jobs report – TechCrunch

to update: Tech stocks have given up all the gains since this post’s rally, with the Nasdaq and the basket of software stocks we’ve been tracking down. From a slightly later perspective, concern about near-full employment and the resulting rise in interest rates appears to have won the battle for market sentiment.

The relationship between economic news and the value of tech stocks has been an interesting mystery in recent months.

You might think that strong jobs reports, for example, will lead to general economic optimism and, therefore, upward movements for technology stocks. You may also expect bad economic data to lead to general economic pessimism, and thus a downward movement for tech stocks. You know, because technology is a huge part of today’s economy.

Ha, no. Well, partially yes, but also no.

With today’s jobs report approaching, a specter hangs over the markets. Namely, the US Federal Reserve, which will begin to tighten monetary policy this year, perhaps until the end of its bond-buying program, lowering its balance sheet and raising interest rates. The result of the Fed’s tightening of interest rates is that bonds and other low-risk assets will become more attractive. At the same time, higher rates are expected to make expensive tech stocks less attractive given the evolution of risk-adjusted returns.

Given this dynamic, you would expect that today’s strong jobs report means tech stocks will fall, and the missing jobs report means tech stocks will rise. That could have happened. We missed December jobs data today (199,000 new jobs reported, about half expectations) and tech stocks Initially sell it. But then, when the markets opened, they rallied, with the Nasdaq up 0.34% — while the Dow Jones Industrial Average fell a tiny bit — and software shares up about 0.8%.

Why decline and then bounce in the value of tech stocks?

over there worry about it We have already reached full employment. Which could mean that the lackluster job number in December was driven not entirely by a lack of employer demand, but also partly by a shortage of workers. (fact that We remain in a global pandemic that is playing into this dynamic, naturally

We find ourselves, then, in a strange situation where the weak jobs report could indicate that the economy is stronger (closer to full employment) than expected, which means that wages and prices will continue to rise, prompting the Fed to raise interest rates. Which means, as mentioned above, that higher risk assets will be sold and less risky assets will become more attractive. However, tech stocks rose a bit because, well, it looks like the markets decided that the poor report would come out positive for tech stocks, which have sold off sharply in recent weeks. Or that a lackluster jobs report will prove less provocative to the Fed than a strong jobs report, in essence.

So, tech stocks are higher today and everyone who works in the industry gets a little bit of wealth.

Leave a Comment