Big Tech stocks face difficulty beyond rising rates

Yahoo Finance Live anchors discuss how inflation and fears of rising interest rates are affecting the tech sector.

Video transcript

BRIAN SOZZI: Welcome back. We still have some time until the opening bell on Wall Street. So let's take a look at what's moving here this morning. We want to start with a dive into today's "Morning Brief Newsletter," written by our very own Julie Hyman. Julie, loved--

JULIE HYMAN: Yes.

BRIAN SOZZI: --"The Morning Brief Newsletter" today. Loved it.

JULIE HYMAN: I'm joining "The Morning Brief" rotation.

BRIAN SOZZI: Love it.

JULIE HYMAN: I'll be writing every Friday newsletter--

JULIE HYMAN: That's huge, huge.

JULIE HYMAN: --at least for the next little while here. And indeed, I looked at the idea of that tech is seemingly so hit by inflation concerns and interest rate concerns, seemingly more so than the broader group. And I tried to figure out why exactly that's happening, right? If you look at rising interest rates having an effect on financing costs, the cost of capital, that doesn't just affect tech, that affects everything. And tech, as far as I can tell, doesn't have a meaningful higher debt load, for example, than other groups, necessarily.

I mean, look at a company like Apple which got smacked on Tuesday, and it's got lots of cash, right? It doesn't matter if higher financing in the case of Apple. So if you look at the "Yahoo Finance Interactive" and you look at the week and what we've seen from the NASDAQ 100, Indeed, of course, it's been an underperformer. It's down 3.2%. It's an underperformer on the year, down 27% compared with around 17% for the S&P 500. And you've seen that play out with many of these individual movers as well.

Here's the one-week look at what we've seen for these large cap tech stocks, the likes of Alphabet and Microsoft and Apple and Amazon. There's also, of course, the read-through from consumer spending, right? It's not only that companies have to pay higher costs, it's that everybody has to pay higher costs, right? As we looked-- saw yesterday, mortgage rates hitting 6% for the first time since 2008. My grocery bill went up 13 and 1/2% year-over-year last month. Like, everybody--

- Your grocery bill went up 13%?

JULIE HYMAN: Everybody's grocery bill. That's what CPI shows.

- Oh, I'm saying--

JULIE HYMAN: Everyone's grocery bill went up. That's how much the cost of food at home went up year-over-year in August. So if everybody's spending more for that stuff, as we've been talking about, you're going to be making more decisions. Are you going to buy maybe not the most expensive Apple iPhone, or you're not going to update or whatever it may be? So there are implications there. And then there's also just, like, the feeling. You talked to Eric Sheridan of Goldman about this out in San Francisco. Just kind of the vibe is not as good for high-- for risk-on sectors like tech at a time like this.

So there's a lot. And there's semiconductors too.

BRIAN SOZZI: And a lot of the companies haven't done well.

JULIE HYMAN: We talked to Paul Meeks.

BRIAN SOZZI: A lot of the companies haven't done well.

JULIE HYMAN: Exactly.

BRIAN SOZZI: They're just not doing well.

JULIE HYMAN: Exactly.

- I've pulled back on some of the purchases that I was planning to make on the tech front.

JULIE HYMAN: Right.