Big Tech could brush off rate hikes. Startups may struggle

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Apple, Microsoft, SoFi and Coinbase all sold off sharply this week, as investors, anticipating higher interest rates, dumped tech stocks and bought shares of companies they believed were undervalued.

Given some time, however, Randy Frederick, Schwab managing director of trading and derivatives, thinks certain tech companies will fare better than others.None of these stocks had a good start to the year. Apple, which became the first public company to be valued at more than $3 trillion on Monday, has shed 5.5% since Tuesday. Over the same period, Microsoft has dropped more than 6%, while fintech startup SoFi and crypto firm Coinbase have fallen 12% and nearly 7%, respectively.

The entire tech industry was swept up in this rotation. But Frederick believes that once the fervor subsides, the Apples and Microsofts of the world will quickly recover, as Wall Street moves to buy its favorite stocks at a discount. That's not necessarily the case for companies like SoFi and Coinbase, which both went public last year and need their businesses to keep expanding at a rapid clip to justify their valuations.

That could continue to hurt the shares of riskier companies that looked a lot shinier six months ago.The US economy added 199,000 jobs in December, the Labor Department reported Friday. That was the fewest jobs added in any month of 2021.Even so, 2021 will go down in history as a year of record-breaking jobs growth. America added 6.4 million jobs, the most since records started in 1939.

On the radar: Investors and policymakers put a lot of stock in the jobs report, an important barometer of the health of the economy. The weak reading could surface some doubt about whether the Fed will move ahead with an interest rate hike in March — now the expectation.

 

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