What happened
The broader market was rebounding this morning, following last week's massive sell-off, and that helped boost the share prices of many tech stocks today. The result was Amazon (AMZN 1.34%) gained 3.8%, Nvidia (NVDA 3.77%) was up by 6.5%, and Meta Platforms (META 3.04%) jumped by as much as 2.5% and had gained 0.7% as of 11:07 a.m. ET.
Investors appeared to be regaining some optimism that the market could be near the bottom and began buying up shares of some tech stocks again.
So what
Stocks plummeted last week after the Federal Reserve raised the federal funds rate by 75 basis points, the highest rate hike since 1994. While investors processed that increase, they also anticipated another rate increase of the same amount would occur at the Federal Reserve's next meeting in July.
Image source: Getty Images.
Shares of Amazon, Nvidia, and Meta weren't immune to sell-off, and all of them tumbled last week as well.
Technology stocks have been particularly vulnerable to negative investor sentiment lately because, in general, the sector is seen as more speculative than some other types of investments.
Amazon, Nvidia, and Meta have fallen as investors worry that interest rate hikes could spur a significant economic slowdown, or potentially even a recession. A slowing economy could hurt Amazon's e-commerce sales and curb spending on Nvidia's chips. Additionally, a slowdown could also hurt Meta's advertising business.
But today's gains from Amazon, Nvidia, and Meta indicate that at least some investors believe the recent plunge in share prices may have hit bottom. There's no guarantee that that's true, of course, but some investors may be thinking that the market has already factored in aggressive rate hikes by the Fed.
Now what
The Federal Reserve is trying to tame inflation -- which has reached a 40-year high -- and has indicated that it's committed to additional aggressive rate hikes to bring it down.
Fed Chairman Jerome Powell said last week that "either a 50-basis-point or a 75-basis-point increase seems most likely at our next meeting." Powell added that he doesn't expect 75-basis-point hikes to be common.
Essentially, that means that the market isn't out of the woods just yet. Even if some investors have factored in another rate hike at the Fed's meeting next month, any additional negative news about the economy -- or if inflation stays stubbornly high -- and the market could see more declines.
All of which means that, while it's good to see Amazon, Nvidia, and Meta climbing today, investors should keep a long-term perspective on these tech giants. If later this week their share prices fall again, investors should remember that buying good companies -- and holding onto them for at least five years -- is the best way to build gains in the market.
