The Nasdaq 100 minis are straining towards their 50-day simple moving average (SMA), with the benchmark index proper having gained 1.71% on Monday.

It was a healthy start to the week for tech stocks, with 90 of the Nasdaq 100 constituents advancing for the day, including the likes of:

• Intel: +2.93%
• Apple: +2.83%
• Nvidia: +2.65%
• Adobe: +2.47%
• Microsoft: +2.45%

Such gains helped to restore the tech-heavy index’s year-to-date performance into positive territory, now up 1.54% for the period. Up until last week, the Nasdaq 100 had found its advances gathered so far in 2021 to be fleeting, as it fluctuated between gains and losses for its year-to-date performance.

What caused the Nasdaq to fall?

Surging Treasury yields have been the culprit for causing tech stocks’ declines since mid-February.

The Nasdaq 100’s highest ever closing price was recorded on 12 February, which coincided with 10-year Treasury yields breaching the psychologically-important 1.20% mark. Since then, 10-year yields have climbed by as much as 55 basis points higher, while the Nasdaq 100 remains 5.22% below its record high.

The rosier US economic outlook has prompted market participants to:

1. Sell US Treasuries, which caused yields to rise
2. Sell expensive tech stocks, which caused the tech-heavy Nasdaq to fall
3. Rotate funds into other equity sectors that would benefit from the economic recovery.

(Note: The S&P 500, the Dow Jones index, and the Russell 2000 index all posted record highs last week)

Considering that the role that soaring Treasury yields has played in being the arch-nemesis to tech stocks, it’s important to note that there are several key auctions of Treasury notes this week amounting to over US$200 billion.

Lackluster demand for these Treasury notes may trigger another yields spike, potentially causing further volatility on the Nasdaq 100 and dragging the index back towards its 100-day simple moving, or perhaps even lower, depending on how much higher yields climb.

Tumultuous Thursday for Tech?

This week is also set to feature a high-profile grilling of the tech titans. The CEOs of Facebook (Mark Zuckerberg), Google (Sundar Pichai), and Twitter (Jack Dorsey) are set to testify before lawmakers in Washington who are accusing these social media platforms of not doing enough to battle misinformation.

These three social media companies make up 75% of the equally-weighted FXTM Social Media index, with the fourth constituent being Snapchat.

Since posting a record high on 17 February, the Social index has been trading sideways, looking for a fresh catalyst. Since that record high, Facebook has been the sole gainer for the period, which is helping prop up the broader index against the declines in the other three constituents:

• Facebook: +7.30%
• Alphabet: -4.15%
• Snapchat: -7.27%
• Twitter: -9.17%

Although Big Tech hasn’t been a stranger to the ire of US lawmakers, a fresh bout of uncertainty stemming from this hearing before the House subcommittee may further dampen these stock prices.

Beyond Thursday’s hearing, news that US President is set to nominate Lina Khan to the Federal Trade Commission may weigh on tech stocks over the longer term. Khan has long warned against the dominance of tech giants and is a known proponent of breaking up Big Tech. Such an appointment indicates that the Biden administration’s antitrust agenda is likely to present a major headwind for these tech counters over the coming years.

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