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Nasdaq surges as tech stocks roar back

Published 03/09/2021, 06:55 AM
Updated 03/09/2021, 04:25 PM
© Reuters. FILE PHOTO: A view of the exterior of the Nasdaq market site in the Manhattan borough of New York City

© Reuters. FILE PHOTO: A view of the exterior of the Nasdaq market site in the Manhattan borough of New York City

By Herbert Lash and Karen Pierog

(Reuters) - U.S. stocks rallied on Tuesday, with the Nasdaq gaining about 4% to recoup heavy losses from the previous session as U.S. bond yields retreated and investors scooped up battered technology stocks.

Tesla (NASDAQ:TSLA) Inc jumped the most in almost a year, while Amazon.com Inc (NASDAQ:AMZN) and Microsoft Corp (NASDAQ:MSFT) posted the biggest single-day gains in five weeks. The tech stars suffered sharp losses in recent weeks as rising yields raised concerns over their high valuations.

The Nasdaq posted its biggest single-day rise since Nov. 4. The Dow set a record intraday high but pulled back from earlier gains at the close.

News that a $1.9 trillion coronavirus relief package was nearing final approval sparked a spike in yields on Monday, pushing the tech-heavy Nasdaq to end more than 10% below its Feb. 12 closing high, confirming a correction for the index.

U.S. 10-year Treasury note yields eased to as low as 1.523% after hovering near 13-month highs of 1.613% on Monday. Longer-dated yields have jumped over the last month as investors price in a faster rebound and higher inflation that expected at the start of the year.

The market is adjusting to the new level in interest rates, said Kristina Hooper, chief global market strategist at Invesco in New York.

Companies whose products and services are in demand when the economy is doing well, known as cyclicals, and small-cap stocks will outperform this year, she said. Tech will end the year higher but not be the leader as it was in the past year's rally.

"Today the 10-year is down a bit, and that takes pressure off valuations, so tech is performing well," Hooper said. "The market is just about getting comfortable at this level of rates."

Rising rates disproportionately hurt high-growth tech companies because they are valued on earnings expected years into the future rather than profits earned in the short term.

"Potential headwind for the market is (when) interest rates rise further from this point over the short period ... since they have risen too fast in too little time," said Michael Sheldon, chief investment officer at RDM Financial in Westport, Connecticut.

The Dow Jones Industrial Average rose 30.3 points, or 0.10%, to 31,832.74, the S&P 500 gained 54.09 points, or 1.42%, to 3,875.44 and the Nasdaq Composite added 464.66 points, or 3.69%, to 13,073.83.

Volume on U.S. exchanges was 13.88 billion shares, compared to the 15.25 billion average for the full session over the last 20 trading days.

The rise in Treasury yields has accelerated a rotation from "stay-at-home" winners to stocks primed to benefit from the economy's reopening, setting the blue-chip Dow on pace to end at a record high on Tuesday.

While the Russell 2000 growth index jumped 3.3% on Tuesday, compared to a 0.1% rise in Russell 2000 value index, it has sharply underperformed its value counterpart since the start of the month.

Shares of Tesla rebounded 19.6% from a deep sell-off that pushed shares down 37% from its peak in January to Monday. It was the largest percentage gainer on both the S&P and the Nasdaq 100.

The global economic outlook has brightened as vaccine rollouts gain speed and the United States launches a massive new stimulus package, the Organization for Economic Co-operation and Development said, hiking its 2021 growth forecasts.

The Democrat-controlled U.S. House of Representatives will take up the relief bill on Wednesday, with the chamber's expected approval leading to President Joe Biden's signing the legislation into law later this week.

The bank index fell 1.7% after vaulting to a new 14-year peak. Economy-linked financials, materials and industrials hovered near record highs.

GameStop (NYSE:GME) also rallied 26.9%, building on Monday's gain of over 40% on the video retailer's e-commerce strategy and speculation that small investors will pour stimulus checks into markets.

Advancing issues outnumbered declining ones on the NYSE by a 1.78-to-1 ratio; on Nasdaq, a 2.83-to-1 ratio favored advancers.

© Reuters. FILE PHOTO: A view of the exterior of the Nasdaq market site in the Manhattan borough of New York City

The S&P 500 posted 37 new 52-week highs and no new lows; the Nasdaq Composite recorded 240 new highs and 17 new lows.

Latest comments

For the china hack id say hack them back but we dont need anything from them so its pointless lol
4% now.
The house of cards will collapse at the slightest hint of interest rate increases, business tax increases, or the end of stimulus.
BS. in the end the stock market has only to do with two Things: Money supply and Psychology. As long as people are cheerful and not in panic mode and the money supply is getting inflated like the 25% during the past 12 months, stocks will keep rising. Valuations are just guidelines in the end.
Vnindex is number one
Whats vn?
vietnam
Another miraculous reversal of a major loss the day after it occurs.  How nice.  Fraudulent, criminally manipulated, predictable joke.
@investing.com please ban this spam account
“Return to normal” stage of the bubble. Bull trap, be careful.
it made perfect sense that after such a drop in the Nasdaq so quickly, the permabulls would be buying the dip, however, this is the A to B on the Elliott wave - it will not reach new ATHs and will instead be a damp squib and be at new lows next week - short the peaks
sell biodiesel at 65.00
Inflation, bonds, interest rates, all these data will implode the market! Good luck to those entered
agree
I smell frustration, denial and jealousy :D
You have shortsell of significant shares earlier?
Buy expennsive now, sell cheap tomorrow, when inflation data released!
Cant let that bubble deflate!
All the trader left trading in us soya oil. this trade failed all trader
intersting volatility, gold is up, dollar is strong... maybe it means the house of card is about to collaps and burry dmb gamblers.
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