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This chart shows why higher rates may take down Facebook and the rest of 'FAANG'

  • In the last few weeks, tech stocks have fallen from being a market leader.
  • Credit Suisse strategists found a chart that indicates tech stocks tend to rise when the 10-year Treasury yield falls.
  • Now, the 10-year Treasury yield looks set to rise as the Federal Reserve plans to raise rates.

Stumbling technology stocks could soon face another hurdle if the Federal Reserve follows through on raising interest rates, Credit Suisse strategists said.

"The performance of FAANG stocks [Facebook, Apple, Amazon.com, Netflix and Google's parent Alphabet] relative to the broader market has moved inversely with interest rate direction since 2003," Lori Calvasina, chief U.S. equity strategist at Credit Suisse, and Sara Mahaffy, vice president of U.S. equity strategy at the firm, said in a Monday report.

The inverse relationship implies "a move higher in interest rates in 2H17 could be a challenge for the group," the note said.

Correlation between FAANG relative performance and 10-year yield

Source: Credit Suisse US Equity Strategy, Thomson Reuters/Eikon, S&P Capital IQ/ClariFi, as of June 2017

The Credit Suisse analysis said the exact mathematical correlation between the relative performance of the big internet stocks and the U.S. 10-year Treasury yield is negative 86 percent. When a correlation is 100 percent that means two assets move in sync. A correlation close to negative 100 percent means two assets move in nearly opposite directions.

Exactly one year ago, the 10-year Treasury yield hit a multidecade low that several strategists don't expect markets will see in the near future. Although the upward climb since then has been bumpy, strategists generally expect yields to move higher given improving global growth, potential government stimulus and tighter monetary policy.

Global sovereign bond yields climbed in the last several weeks after European Central Bank President Mario Draghi said "reflationary forces are at play." In the U.S., traders expect the Federal Reserve to raise the benchmark interest rate at least one more time this year, and begin reducing balance sheet holdings.

Tech stocks have the greatest weighting in the S&P 500 and can easily direct the overall market performance. The sector has surged more than 18 percent this year as the best S&P 500 performer, but struggled in the last several weeks as traders worried big tech names may be getting too expensive.

Over the last 30 trading days, technology is only the fourth-best performer in the S&P 500. The benchmark index last hit a record nearly a month ago on June 19.

Tech traded slightly higher Tuesday, on pace for weekly gains of more than 1 percent.

However, the "tech bounce [is] likely short lived," Fundstrat Technical Strategist Robert Sluymer said in a Tuesday note. "Our longer-term cycle indicators continue to suggest downside risk heading into August and the Fall."

Some of those indicators, Sluymer said, include the economic surprise index for G-10 economies that is "collapsing from peak levels" and a falling percentage of stocks with positive momentum.

— CNBC's Jeff Cox contributed to this report.

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