US tech stocks shrugged off earlier losses to rally late in the New York afternoon on Tuesday, as investors braced themselves for a further batch of earnings reports.

The technology-heavy Nasdaq Composite index moved 0.3 per cent higher, while the S&P 500’s tech sector remained down 0.4 per cent, despite bouncing back from more severe losses earlier in the day. In January the Nasdaq slid 9 per cent and the blue-chip S&P fell 5.3 per cent, their worst month since the start of the pandemic.*

The price swings came as traders await earnings after Tuesday’s closing bell from Google parent Alphabet, one of the world’s biggest publicly listed companies. Amazon and Facebook owner Meta are also set to report their latest quarterly figures this week. Alphabet was trading 1.2 per cent higher in the New York afternoon.

Earnings from fellow tech heavyweights Apple and Microsoft had “set a positive tone for the street heading into this week”, Daniel Ives, Wedbush analyst, said in a note to clients. However, traders are also contending with rising interest rates, which makes holding shares of tech companies whose lofty valuations are premised on expectations for a sustained period of high growth look less appealing.

“Will a rising rate environment make the Street ultra-sensitive to valuations on the tech space looking ahead?” Ives asked. “The answer is emphatically yes. However, the digital transformation happening today on the enterprise and consumer fronts is not slowing down,” he said.

Following last month’s decline, some investors see February as an opportunity to buy into a dip caused by markets having priced in too many rate rises this year, while others caution it is too early to turn bullish.

“Our bias,” said Ben Bennett, Legal & General Investment Management’s head of investment strategy, is “to buy into the weakness”.

“Economic growth should remain robust in the coming quarters,” Bennett added, which would translate into “improving corporate fundamentals”.

“I think we are not done,” said Kasper Elmgreen, Amundi’s head of equities, “with this battle between rising rates putting pressure on equity valuations and the counterpoint of pretty solid earnings coming through”.

Brent crude, the oil benchmark, fell 2.1 per cent to $89.12 a barrel on Tuesday, but remained close to its highest price since 2014, hit on January 28.

Tensions between Russia and Ukraine could further elevate oil prices, Elmgreen added. “And energy prices are pretty important as we are already in a market where inflation is running rampant and this is the whole reason the Fed needs to step in.”

Futures markets anticipate the Federal Reserve raising rates as many as five times this year after the central bank pinned borrowing costs close to zero in March 2020.

In Europe, the Stoxx 600 share index closed 1.3 per cent higher, helped by bank shares, which benefit from expectations of higher borrowing costs.

Germany’s 10-year Bund yield held above zero on Tuesday, in a rare sustained move out of negative territory, as high inflation piled pressure on the European Central Bank to rethink its ultra-loose monetary policies. The ECB holds its next monthly meeting on Thursday.

The yield on the 10-year US Treasury note, a benchmark for debt pricing worldwide, rose 0.02 percentage points to 1.80 per cent.

In Asia, Hong Kong’s Hang Seng index rose 1.1 per cent and South Korea’s tech-heavy Kospi gained 1.9 per cent.

*This article has been amended to reflect the correct year since the Nasdaq last had a bigger one-month decline