(C) Reuters. FILE PHOTO: A view of the exterior of the Nasdaq market site in the Manhattan borough of New York City
By Herbert Lash and Karen Pierog
(Reuters) – Technology-related shares sold off on Monday in a big downturn that pushed the Nasdaq into corrective territory and offset stocks that rose on hopes the $1.9 trillion COVID-19 relief bill will spur the U.S. economy.
The big technology stocks that have led Wall Street to scale successive peaks over the past year’s rally fell with the Nasdaq closing down 2.41%, roughly 10.5% below its Feb. 12 record close of 14,095.47.
Financial shares and restaurant and travel-related stocks that are expected to do well when the economy reopens rose but were unable to offset the weight of the bigger tech shares that dominate the U.S. stock market.
After the legislation won U.S. Senate approval on Saturday, President Joe Biden said he hoped for a quick passage of the revised coronavirus relief package by the Democrat-controlled House of Representatives so he could sign it and send $1,400 direct payments to Americans.
Prospects of more government spending and faster economic growth have stoked fears of a spike in inflation, sending the benchmark 10-year Treasury yield to near one-year highs.
U.S. Treasury Secretary Janet Yellen, however, said on Monday the package would fuel a “very strong” U.S. recovery and she did not expect the economy to run too hot because of the increased spending.
In the S&P 500, the financial sector was the biggest boost, hitting a record as higher market interest rates and a steeper yield curve helped banks. Industrials were right behind, also reaching a record high, while the materials sector neared an all-time peak. The technology sector was deepest in the red.
As bonds yields have moved higher, concerns about equity valuations for growth-oriented stocks and tech stocks specifically have weighed on the Nasdaq relentlessly the last three weeks, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
Financials, along with restaurant and travel-related stocks that will do well as the economy reopens, have been leading the charge higher, James said.
“People have been reallocating assets into those sectors. It’s been coming out of growth-tech to fund that those purchases,” he said.
The Dow Jones Industrial Average rose 306.14 points, or 0.97%, to 31,802.44, the S&P 500 lost 20.59 points, or 0.54%, to 3,821.35 and the Nasdaq Composite dropped 310.99 points, or 2.41%, to 12,609.16.
Volume on U.S. exchanges was 14.03 billion shares.
A slide in the big tech stocks that have driven the rally in equities since pandemic-induced lows of last March continued, with Apple Inc (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA) Corp, Tesla (NASDAQ:TSLA) Inc and Alphabet (NASDAQ:GOOGL) Inc’s Google leading declining shares on Nasdaq.
Tech stocks are particularly sensitive to rising yields because their value rests heavily on earnings in the future, which are discounted more deeply when bond returns go up. The divergence between the tech stocks and non-tech stocks explains trading today, said Joe Saluzzi, partner and co-founder of Themis Trading in Chatham, New Jersey. “The stimulus package will be certainly helping the bigger cap names,” Saluzzi said, referring to non-tech stocks. “The get-out and non-stay at home stocks are doing better now,” he said.
Banks added about 2% as the yield on the benchmark 10-year note stood near a 13-month high, while airlines jumped about 5%.
Walt Disney (NYSE:DIS) Co jumped about 6% as California health officials set new rules that would allow Disneyland and other theme parks, stadiums and outdoor entertainment venues to reopen as early as April 1.
GameStop Corp (NYSE:GME) surged about 42% after the company said it had tapped shareholder Ryan Cohen to lead a transition to an e-commerce business.
Advancing issues outnumbered declining ones on the NYSE by a 1.39-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored decliners.
The S&P 500 posted 124 new 52-week highs and no new lows; the Nasdaq Composite recorded 405 new highs and 28 new lows.
Nasdaq hits correction, Dow advances as stimulus bill nears finish line