(C) Reuters. FILE PHOTO: A view of the exterior of the Nasdaq market site in the Manhattan borough of New York City
By Shashank Nayar and Medha Singh
(Reuters) – U.S. stocks advanced on Tuesday, with the Nasdaq jumping over 3% to recoup its losses from the previous session, as U.S. bond yields retreated and investors picked up battered technology stocks.
Tesla (NASDAQ:TSLA) Inc jumped about 14%, while Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and Microsoft Corp (NASDAQ:MSFT) gained between 2.3% and 3.4% after sharp losses in recent weeks as a rise in yields raised concerns over their high valuations.
“Usually when things are significantly sold off, like the tech sector, traders tend to buy in,” said Matthew Stucky, portfolio manager at Northwestern (NASDAQ:NWE) Mutual Wealth Management.
Signs that a $1.9 trillion coronavirus relief package was nearing final approval sparked a spike in yields on Monday, pushing the tech-heavy Nasdaq to end more than 10% below its Feb. 12 closing high that confirmed a correction.
U.S. 10-year Treasury bond yields eased to 1.54% after hovering near 13-month highs of 1.613% in the prior session. Longer-dated yields have jumped over the last month as investors price in a faster-than-expected economic rebound and higher inflation.
Higher yields can weigh on tech and growth stocks with lofty valuations, as they threaten to erode the value of their longer-term cash flows.
“Potential headwind for the market is (when) interest rates rise further from this point over the short period … since they have risen too fast in too little time,” said Michael Sheldon, chief investment officer at RDM Financial in Westport, Connecticut.
At 11:39 a.m. ET, the Dow Jones Industrial Average rose 263.71 points, or 0.83%, to 32,066.15, the S&P 500 gained 69.44 points, or 1.82%, to 3,890.79 and the Nasdaq Composite gained 433.62 points, or 3.44%, to 13,042.78.
The rise in yields has accelerated a rotation from “stay-at-home” winners to stocks primed to benefit from an economic reopening, setting the blue-chip Dow on pace to end at a record high on Tuesday.
While the Russell 2000 growth index jumped over 3.2% on Tuesday, compared to a 0.7% rise in Russell 2000 value index, it sharply underperformed its value counterpart since the start of the month.
The global economic outlook has brightened as vaccine rollouts gain speed and the United States launches a massive new stimulus package, the Organisation for Economic Cooperation and Development said, hiking its 2021 growth forecasts.
The U.S. House of Representatives will take up the relief bill on Wednesday, with the chamber’s expected approval allowing the Democratic president to sign the legislation into law later this week.
The bank index dropped 0.6% after vaulting to a new 14-year peak. Economy-linked financials, materials and industrials hovered near record highs.
GameStop (NYSE:GME) was up 22%, building on Monday’s rise of over 40% on the video retailer’s e-commerce strategy and speculation that small investors will pour stimulus checks into markets.
Advancing issues outnumbered decliners by a 2.4-to-1 ratio on the NYSE and by a 3.5-to-1 ratio on the Nasdaq.
The S&P 500 posted 34 new 52-week highs and no new low, while the Nasdaq recorded 234 new highs and 20 new lows.
Nasdaq surges 3% as tech stocks roar back