(Bloomberg) — Investors poured back into the market’s riskiest assets Tuesday as dip-buyers powered the Nasdaq 100 to its biggest rally since November and sent Bitcoin back toward a record. Treasuries rose with gold, while the dollar weakened.
Stay-at-home winners surged after being left for dead as vaccinations pick up and Democrats move to inject $1.9 trillion into the economy. Treasury yields pulled back from recent highs sparked by worries a potential overshoot in the economy will bring inflation. For a day, at least, the rotation from growth shares to value reversed violently. Here are some of the major moves:
Peloton Interactive Inc., DocuSign Inc. and Pinduoduo Inc. jumped at least 9.5%; Tesla Inc. rallied more than 14% to halt a five-day slide.Financial firms and energy producers, recent winners, were the only two S&P 500 groups to retreat.Spot gold surged more than 2% after falling to lowest since April.The 10-year yield fell back below 1.6%.Bitcoin jumped above $54,000.Oil and copper retreated after recent rallies.
The rising prospects for turbo-charged economic growth have been reordering the market’s winners and losers for the past two months as the stimulus bill’s passage grew more likely and daily vaccinations surged. Tuesday, dip buyers targeted the areas recently abandoned as too expensive. The reversal is a theme that’s played out for years, every pull back gets bought, and it’s been extreme lately — the S&P 500 hasn’t had a pullback of 5% since November.
The drop in Treasury yields after the recent violent runup has given some cover for risk takers to wade back into growth after abandoning the group because stretched valuations began to look scary with rates on the rise.
“Let’s not forget that less than a year ago traders interpreted one of the biggest negative macro events in market history as a buying opportunity, so there’s little reason to think otherwise given all the positive signals around us today,” said Chris Larkin, managing director of trading and investing product at E*Trade Financial. “Corrections create natural inflection points for traders. It’s no surprise to see the Nasdaq rise today, and the fundamentals support continued bullishness.”
Investors will be closely watching Treasury sales in the coming days, with the U.S. planning three debt auctions totaling $120 billion. The sales will test appetite for the safest debt after last month’s poorly bid auctions sent shockwaves throughout global markets and short bets climbed to a record. Benchmark 10-year yields breached the 1.6% level to trade at a one-year high last week.
Prospects of accelerating growth have driven up borrowing costs in recent weeks, raising the specter of inflation and unsettling tech stocks with long-term growth horizons. Treasury Secretary Janet Yellen sought to allay fears that runaway inflation could damage the economy on Monday.
“I really don’t think that’s going to happen,” she told MSNBC. Inflation before the pandemic “was too low rather than too high,” she noted.
Yellen Says Stimulus Unlikely to Cause Inflation Problem
Elsewhere, Bitcoin was steady around $54,000 after hitting a two-week high on more signs of institutional interest. Oil hovered around $65 a barrel.
Here are some key events to watch:
EIA crude oil inventory report is due WednesdayThe U.S. February consumer price index will offer the latest look at price pressures Wednesday.The U.S. government auctions 3-, 10- and 30-year Treasuries this week.The European Central Bank holds its monetary policy meeting and President Christine Lagarde is set to do a briefing Thursday.
Stocks
The S&P 500 Index advanced 2.1% as of 12:40 p.m. New York time.The Nasdaq 100 added 4%.The Stoxx Europe 600 Index gained 0.8%.The MSCI Asia Pacific Index increased 0.8%.The MSCI Emerging Market Index rose 0.5%.
Currencies
The Bloomberg Dollar Spot Index sank 0.5%.The euro gained 0.5% to $1.1901.The British pound climbed 0.6% to $1.3908.The Japanese yen rose 0.2% to 108.66 per dollar.
Bonds
The yield on 10-year Treasuries dipped five basis points to 1.54%.Germany’s 10-year yield dipped five basis points to -0.32%.Britain’s 10-year yield declined four basis points to 0.71%.
Commodities
West Texas Intermediate crude dipped 0.6% to $64.69 a barrel.Gold strengthened 2.1% to $1,719.33 an ounce.
(A prior version of this story corrected spelling of Peloton in first bullet point.)
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