U.S. stock-market benchmarks rallied Tuesday as a falling bond yields helped send the tech-heavy Nasdaq Composite up sharply a day after it tumbled into correction territory.
What are major indexes doing?
- The Dow Jones Industrial Average DJIA, +0.89% rose 338 points, or 1.1%, to around 32,143, trading near its intraday record at 32,150.32.
- The S&P 500 SPX, +1.92% was up 79 points, or 2.1%, at 3,900.
- The Nasdaq Composite COMP, +3.65% surged 475 points, or 3.8%, to 13,085.
On Monday, the Dow DJIA, +0.89% ended with a gain of 306.14 points, or 1%, at 31,802.44 after rising more than 650 points earlier in the session to hit an intraday record. The S&P 500 finished with a loss of 0.5%. And the Nasdaq slumped 2.4% to end at 12,609.16, leaving it 10.5% off its record close from Feb. 12. The Nasdaq’s slide meets the definition of a correction, which is a fall of 10% from a recent peak.
What’s driving the market?
Treasury yields have been calling the tune, with their recent rise fueling a rotation away from growth-oriented stocks, including many of the highflying tech-related shares that boomed during the pandemic-inspired lockdowns.
Investors have been using the proceeds to pile into shares of more cyclical and value-oriented stocks and sectors that are seen as poised to benefit most from a wider reopening of the economy.
But that dynamic was put on hold after the yield on the 10-year Treasury note TMUBMUSD10Y, 1.557% fell around 4 basis points at 1.56%. Yields and bond prices move in opposite directions.
Before Tuesday, it was rising yields that had sparked an exodus from shares that had rallied during the recovery from the pandemic lows set nearly a year ago.
“The cyclical rotation has been running strong for months and today is an overdue buying the dip for technology stocks. The move in tech stocks coincides with the rally in Treasuries, so many traders will be skeptical that this rebound will stick,” said Edward Moya, senior analyst at OANDA.
Meanwhile, the House is expected this week to provide final approval of a $1.9 trillion package of COVID relief spending, giving President Joe Biden an early political victory and stoking expectations for a surge in economic growth later in 2021, accelerating a reopening fueled by vaccine rollouts and past doses of stimulus.
That same dynamic has fed the rise in bond yields as investors look for at least a near-term surge in inflation.
Investors will get a look at inflation data later this week, but the economic calendar was indeed light on Tuesday. The National Federation of Independent Business said its closely followed optimism index edged up to 95.8 last month from 95 in January.
Meanwhile, Washington will keep the spotlight on Robinhood and other zero-commission brokers when the Senate Banking Committee holds a hearing at 10 a.m. Eastern, with expert witnesses set to warn of the dangers of financial speculation.
Which companies are in focus?
- Tesla Inc. TSLA, +16.00% shares were up nearly 15% Tuesday after upbeat car sales data out of China. Shares were attempting to snap a five-day losing streak that saw them drop 21.6% through Monday,
- Shares of GameStop Corp. GME, +23.74% jumped 22% to trade above $200 again, building on Monday’s 41% gain, which came after the company said it has created a new strategy committee to identify ways to accelerate its transformation.
- Other stocks, which, like GameStop, were heavily promoted on Reddit’s WallStreetBets forum were also on the rise Tuesday, including movie-theater chain AMC Entertainment Holdings Inc. AMC, +10.98%, BlackBerry Ltd. BB, +7.08%, Naked Brand Group Ltd. NAKD, +2.55%, and headphone maker Koss Corp. KOSS, +0.80%.
- Shares of Dick’s Sporting Goods Inc. DKS, -6.51% slumped 5.9% after reporting fourth-quarter results Tuesday morning.
- Stitch Fix Inc. SFIX, -29.78% shares plunged 28% after the retailer reported fiscal second-quarter sales that missed Wall Street expectations.
What are other markets doing?
- The ICE U.S. Dollar Index DXY, -0.29%, a measure of the currency against a basket of six major rivals, was down 0.3% after hitting a more-than-three-month high on Monday.
- Oil futures pulled back in choppy trade, with the U.S. benchmark down 1.3% at $64.19 a barrel.
- Gold futures GC00, +2.26% were buoyed as Treasury yields and the dollar retreated, bouncing 2.2% to $1,714.10 an ounce.
- The pan-European Stoxx 600 SXXP, +0.76% rose 0.8% and London’s FTSE 100 UKX, +0.17% gained 0.2%.
- In Asia, the Shanghai Composite SHCOMP, -1.82% stumbled 1.8%, while Hong Kong’s Hang Seng Index HSI, +0.81% rose 0.8% and Japan’s Nikkei 225 NIK, +0.99% rallied 1%.
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