What happened
The stock market was having a strong day on Thursday. With about an hour left to go until the market's close, all three major indexes were in positive territory and the tech-heavy Nasdaq Composite was up about 2.5% for the day.
Insurance technology company Lemonade (LMND -0.46%) was a big outperformer. As of 3 p.m. EST, shares were higher by more than 14%.
Image source: Getty Images.
So what
There isn't any company-specific news for Lemonade today. In fact, the latest news item in my feed is an analyst downgrade from earlier in the week.
Instead, this seems to be driven by the overall rally in the high-flying tech stocks that have been beaten down in recent weeks. As interest rates rose sharply, it put pressure on richly valued tech stocks, many of which are trading for significantly below their recent highs. In fact, even after today's rally, Lemonade is still more than 40% below its all-time high reached earlier in 2021.
However, yields seem to have stabilized. After reaching a yield of more than 1.6% on Monday, the 10-year Treasury yield has pulled back below 1.52% and has been quite stable for a few days. Without getting too deep into the reasons why highly valued tech stocks are so rate-sensitive, the key point is that rising interest rates (especially rapidly spiking rates) are generally bad news. So, rate stabilization is a welcome development.
Now what
As mentioned, Lemonade is still well off its recent highs, and its business is performing quite well. While any further spikes in interest rates could certainly pressure the stock in the near term, this could still be a smart buying opportunity for patient long-term investors.
