US stocks surged on Tuesday, jumping more than 3 percent on the Nasdaq to meet their losses in the previous session, as US bond yields retreated and investors picked up battered technology stocks.
Among the biggest increases in the S&P 500 and Nasdaq were Tesla, Apple, Amazon, Facebook and Microsoft, raising concerns in recent weeks over its high valuations as yields rose by 2.4 percent and 7.2 percent.
Signs that the $ 1.9 trillion coronavirus relief package was closing on final approval increased yields on Monday, pushing the tech-heavy Nasdaq to end below 10 percent over February 10.
The US 10-year Treasury Bond Yield peaked at 1.54 percent after coming close to a 13-month high of 1.613 percent in the preceding session. Long-term yields have jumped compared to the previous month due to faster-than-expected economic returns and higher inflation than investors.
Higher yields can weigh on Tech and Growth stocks more heavily, as they threaten to destroy the value of their long-term cash flows.
“There has been some upside after the fluctuations in tech stocks, which has led to a positive outlook so far,” said Michael Sheldon, chief investment officer at RDM Financial in Westport. Connecticut
“There is a potential headwind for the market, if interest rates rise further by this point in the short term … because they have risen very quickly in a very short period of time.”
The Dow Jones Industrial Average rose 168.01 points or 0.53 percent to 31,970.45, the S&P 500 rose 57.06 points, or 1.49 percent, to 3,878.41, and the Nasdaq Composite rose 399.55 points, or 3.17 percent, to 13,008.71.
The increase in yields has intensified a rotation from “stay-at-home” winners to stocks benefiting from an economic reintegration that saw blue-chip Dow reach intraday record highs on Monday.
The global economic outlook has accelerated the pace of vaccine rollout and the United States launched a massive new stimulus package, the Organization for Economic Co-operation and Development said, raising its 2021 growth forecast.
The House of Representatives may approve the Relief Bill on Wednesday morning, with a vote allowing the Democratic president to sign the legislation later this week.
The Bank Index reached a new 14-year peak. The financial and energy sectors were in red.
GameStop was up 18 percent, building on Monday the video retailer’s e-commerce strategy and growth of more than 40% that small investors would put incentive checks in the markets.
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