U.S. stocks jumped sharply on Tuesday after bond yields declined, causing investors to buy the dip in beaten-up technology shares.
The tech-heavy Nasdaq Composite climbed 3.5%, on pace for its best day since November. Tesla shares popped 14% after a five-day losing streak, while Apple and Amazon jumped 4% each. Microsoft, Netflix and Facebook all gained at least 3%. The Dow Jones Industrial Average rose 300 points to hit an intraday record high. The S&P 500 gained 2%.
Technology shares rebounded from steep losses as bond yields stabilized. The 10-year Treasury yield fell more than 6 basis points to 1.52%. The benchmark rate traded as high as 1.62% on Monday.
“After lagging badly for the last few weeks, growth/momentum stocks are exploding higher as investors grow a bit more comfortable around rates and step in to buy this erstwhile most-loved sector,” Adam Crisafulli, founder of Vital Knowledge, said in a note.
The Nasdaq shed 2.4% in the previous session to close more than 10% below its Feb.12 high and falling into correction territory. High-growth names have been pressured lately as rising rates make their future profits less valuable today, making it hard to justify the stocks’ lofty valuations.
Many popular technology stocks have fallen double digits over the past month amid rate fears. Apple has dropped 12% in the past month, while Tesla has tumbled nearly 30%. Pandemic bets Zoom Video and Peloton have both fallen more than 20% during the same period.
“A lot of these tech stocks have become oversold on a short-term basis. Therefore, it’s not a big surprise that they’re seeing a nice bounce,” said Matt Maley, chief market strategist at Miller Tabak. “The question will be whether this bounce is a strong one…or a ‘dead cat bounce’ that doesn’t last very long at all.”
Meanwhile, Senate approval of the $1.9 trillion economic relief and stimulus bill had prompted investors to continue to rotate into reopening plays and cyclical stocks to bet on a sharp economic rebound. The rally in these areas of the market took a breather on Tuesday. Energy was the only sector in the red Tuesday, dipping 0.7% after rallying 9% this month alone. Financials and industrials also underperformed.
“Right now the market is broadening out and we think in an underlying sense the bull market is strengthening and that will play to our benefit over the longer term,” said Cathie Wood of Ark Investment Management on CNBC’s “Closing Bell” on Monday.
“We are getting great opportunities” in the sell-off to buy the pure play names in the funds, added Wood, who focuses on disruptive technology stocks. Wood’s flagship fund Ark Innovation (ARKK) popped more than 9% Tuesday.
Hedge fund manager David Tepper said on Monday the recent sharp rise in rates is likely over and it’s hard to be bearish on stocks right now. Tepper noted names like Amazon were starting to look attractive.
