Investors are gravitating toward big technology stocks as banking crisis worries rock U.S. markets, hoping the shares are better positioned to withstand a possible economic downturn and will benefit from a steep drop in bond yields.
As of Wednesday, the S&P 500 technology sector (.SPLRCT) was down 1.7% compared to a 3.6% drop for the broader benchmark stock index (.SPX) since March 8, when problems at Silicon Valley Bank set off fears of financial system contagion.
Among the big tech stocks, Apple Inc (AAPL.O) has fallen 1.5% over that time, while Microsoft Corp (MSFT.O) climbed 3.4% and Intel Corp (INTC.O) rose over 7%.
Large tech stocks generally screen well on “quality” metrics, such as balance sheet strength and profit margins, heightening their allure when economic uncertainty arises, said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.
With investors “starting to price in solvency risk or the potential of companies needing capital, the market is rewarding those that don’t need capital to survive,” he said.
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