(Bloomberg) -- Investors gobbled up megacap technology stocks Wednesday even as the Federal Reserve took a more hawkish stance than expected, doubling the pace of stimulus rollbacks and projecting three rate hikes next year.
Apple Inc. was the hot pick, rising as much as 2.9%. The world's largest company by market value is roughly 2% short of hitting a $3 trillion valuation. Megacap peers Microsoft Corp. and Google-owner Alphabet Inc. also rallied off day's lows and were about 5% away from their all-time highs. The tech-heavy Nasdaq 100 was the best performing major average, rising 2.4%.
The strength in those stocks in the face of hawkish Fed commentary shows how much investors want to own high-quality companies with track records of profit growth even with the risk of rising rates, according to Michael Mullaney, director of global market research at Boston Partners.
Read: Fed Doubles Taper, Signals Three 2022 Hikes in Inflation Pivot
“I'm guessing those megacap, Faang-like growth names will continue to do OK unless we get a significant spike in interest rates,” he said, highlighting the lackluster move in 10-year U.S. Treasury yields, which remain below 1.50. He sees 2% as a threatening level.
Markets were well positioned for the event and cut some of risks before hand, according to Chris Murphy, co-head of derivatives strategy at Susquehanna International Group,. “Now that the event/overhang is over we are beginning to see a little bit of market strength after the event,” he said.
Tech valuations have soared to levels last seen during the late 1990s dot-com bubble, which has made some investors risk-averse. The Nasdaq Composite Index, home to some of the most expensive tech stocks, is down 1.9% since its Nov. 19 peak while the broader S&P 500 is up 0.1% over the same time.
What's more, two-thirds of the Nasdaq's 3,600-plus stocks are trading below their average price for the past 200 days, an indicator that signals to chart watchers that the index is in a long-term downtrend. High-growth technology stocks make up more than half of the benchmark.
Some companies like Crowdstrike Holdings Inc. and Coupa Software Inc. have seen their shares fall more than 25% from their all-time highs.
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