Tech stocks dragged down the S&P 500 Wednesday amid rising bond yields, while names tied to an economic recovery provided the market with some support.
The S&P 500 traded 0.8% lower, while the Nasdaq Composite fell 1.6%. The Dow Jones Industrial Average gained 40 points, supported by a 3% jump in Boeing shares.
The weakness came as the 10-year Treasury yield extended its gains. The benchmark rate gained more than 8 basis points to 1.49% Wednesday after surging to a high of 1.6% last week in a move that some described as a “flash” spike. The continuous rise in bond yields is raising concerns about equity valuations and a pickup in inflation.
“Interest rates just won’t cut a break for this market,” Jim Cramer said on CNBC’s “Squawk Alley.”
Higher bond yields can hit technology stocks particularly hard as they have been relying on easy borrowing for superior growth.
President Joe Biden said late Tuesday that the U.S. will have a large enough supply of coronavirus vaccines to inoculate every adult in the nation by the end of May. That would be two months ahead of schedule. The vaccine rollout is seen as key part in getting Americans back to work and for the economy to recover.
Growing optimism over the vaccine rollout sparked a rally in cyclical stocks and reopening plays. American Airlines popped 4%, while Carnival and Norwegian Cruise Line jumped about 6% each. The energy sector rose 2%.
“While the S&P 500 may be facing structural head-winds due to tech weakness, much of the rest of the market is actually doing quite well,” Tom Essaye, founder of Sevens Report, said in a note. “Overall, most non-tech stocks are weathering the increase in bond yields quite well.”
On the data front, private companies added 117,000 new jobs in February, according to a report Wednesday from payroll processing firm ADP. Economists polled by Dow Jones expect 225,000 private jobs were added last month.
Meanwhile, the pace of growth in the services side of the U.S. economy decelerated in February. The ISM Nonmanufacturing Index showed a reading of 55.3 for last month, down 3.4 percentage points from January and below the 58.7 Dow Jones estimate.
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