Tech stocks put pressure on the broader market on Wednesday amid a jump in Treasury yields, while investors continued to piled into names sensitive to an economic comeback.
The Dow Jones Industrial Average traded 80 points higher after falling more than 100 points. The biggest gainers in the blue-chip Dow were energy, industrials and financials, including Boeing, Goldman Sachs, Chevron and Caterpillar. The S&P 500 rose just 0.1%.
The tech-heavy Nasdaq Composite fell 1% as Apple, Microsoft and Amazon all slid more than 1%. Technology stocks sold off as the 10-year Treasury yield topped 1.4% to hit its highest level since February 2020. Higher interest rates could prompt investors to rotate out of high-flyers and into bonds, while they could hamstring growth companies, which benefited from the low-rate environment.
Yields jumped higher even after Federal Reserve Chair Jerome Powell said in a congressional hearing Tuesday that inflation was “soft” and that the U.S. economy was “a long way from our employment and inflation goals.”
Powell’s visit to Capitol Hill will continue when he addresses the House of Representatives Financial Services Committee Wednesday.
“Volatility along the way is to be expected, and higher rates will continue to drive more risk down into sectors and factors, but … dips in the equity market are meant to be bought in this environment,” Christopher Metli, a quantitative and derivative strategist at Morgan Stanley, said in a note.
The stock market staged a big intraday comeback in the previous session after the Fed chief’s remarks eased some of the concerns about a pickup in price pressures as well as rising rates. The Dow and S&P 500 erased sharp losses to finish modestly higher. The Nasdaq Composite, which was down nearly 4% at one point, finished with a loss of just 0.5%.
Tesla shares were slightly higher after Ark Invest’s Cathie Wood bought a ton more of her biggest holding during Tuesday’s selling. Wood bought more than $120 million worth of Tesla shares for the flagship Ark Innovation ETF, according to the firm’s website.
Bitcoin, which some view as a barometer of speculation in financial markets, rebounded back above $50,000 on Wednesday after more buying of the cryptocurrency from Square.
Marci McGregor, senior investment strategist at Bank of America Merrill Lynch, said on “Closing Bell” that market sentiment pointed to a needed pullback but the overall setup for stocks remained positive.
“We’re still in the early innings of a new economic expansion. Our view is we’re in a long-term secular bull market,” McGregor said. “It sounds like [Powell] still has his foot on the gas.”
On Wednesday, the Food and Drug Administration’s staff endorsed Johnson & Johnson‘s single-shot Covid-19 vaccine for emergency use, bringing in a third vaccine to the U.S.
