Tech stocks dragged down the broader market on Wednesday as a jump in Treasury yields put pressure on risk assets.
The S&P 500 dipped 0.5%, while the Dow Jones Industrial Average fell 100 points. The tech-heavy Nasdaq Composite fell 0.9% as Apple, Microsoft and Amazon all slid more than 1%.
The weakness in stocks came 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-flying stocks and into bonds, while they could hamstring growth companies like tech, which benefited from the low-rate environment.
Wednesday’s moves followed a wild comeback during Tuesday’s market hours that saw the Dow and S&P 500 erase sharp losses to finish modestly higher. The positive finish snapped a five-day skid for the S&P 500. The Nasdaq Composite, which was down nearly 4% at one point, finished with a loss of just 0.5%.
The rebound began after Federal Reserve Chair Jerome Powell released his prepared remarks for a hearing with the Senate Banking Committee, with the central bank chief saying 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.
Tesla shares were higher by 2% after it was revealed 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 after more buying of the cryptocurrency from Square.
Marci McGregor, senior investment strategist at Bank of America Merrill Lynch, said on “Closing Bell” market sentiment pointed to a needed pullback but the overall setup for stocks remained positive.
“We’re still in the earnings of a new economic expansion. Our view is we’re in a long-term secular bull market,” McGregor said. “We heard from Jay Powell today, and it sounds like he 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.
