What happened
Shares of Appian (APPN 0.19%), Pinterest (PINS -0.52%), and MongoDB (MDB 0.81%) were falling this morning as the broader tech sector tumbled in response to rising bond yields.
Appian was down 8.1%, Pinterest fell 5.3%, and MongoDB slid 4.3% as of 10:44 a.m. EDT.
So what
There was no company-specific news causing the drop for any of these stocks. Instead, it appeared that investors were responding to the 10-year Treasury yield hitting 1.74%, which is the first time the rate has surpassed 1.7% in more than a year.
Image source: Getty Images.
Investors have, in general, been selling technology stocks over the past few months as bond yields have risen, fearing that increased rates will lead to inflation. These investors likely think that rising inflation could lead to slower growth for companies in the high-growth tech sector, so they are instead moving their money into slower, more stable companies.
Technology stocks have soared during the pandemic, as investors rushed to snatch up shares of high-growth companies. As a result, Appian's stock spiked 325%, Pinterest skyrocketed 460%, and MongoDB gained 163% over the past 12 months.
But many tech stocks have reversed course since the beginning of this year as investors looked to other sectors that could grow as the U.S. economy begins to slowly emerge from the effects of the pandemic.
For example, shares of bank stocks and airlines are looking increasingly appealing to investors as they anticipate Americans getting back to relative normal later this year.
This exit from the tech sector has caused Appian's and MongoDB's share prices to slide 5.7% and 15.9%, respectively, year to date.
Now what
Investors should expect some more volatility from tech stocks in the coming months, as people try to decide how to invest their money as the economy starts growing. The Federal Reserve met yesterday and increased its estimate for U.S. real gross domestic product growth to 6.5% in 2021, up from its previous estimates of 4.2%.
While a brighter outlook for the economy is good news, it means that the red-hot tech sector is less alluring than it was over the past year.
But Appian, Pinterest, and MongoDB investors should remember that they should be focusing on the companies' long-term growth prospects -- and not focus too much on inflation, bond yields, or what other investors are doing.
For example, Appian's sales increased 19% in the most recent quarter and the company outpaced Wall Street's consensus earnings estimate. Meanwhile, both MongoDB and Pinterest blew past analysts' consensus earnings and revenue estimates in the fourth quarter.
In short, investors should take today's share price drop from these companies in stride and know that it doesn't mean that these tech stocks aren't still great long-term investments.
