US stocks rose Tuesday after a decline in bond yields led investors into the battered tech sector.
The Nasdaq Composite rose 3.69% to 13,073.82 for its best day since November. Tesla rose 19.6% after a five-day streak of bad luck, posting its biggest one-day pop since February 2020. Apple and Facebook each gained more than 4%, while Microsoft and Netflix each gained at least 2.5%. Amazon rose 3.8%. The tech-heavy benchmark even increased by 4.3% during the session.
The S&P 500 gained 1.4% to 3,875.44. The Dow Jones Industrial Average closed the day near its session low, rising just 30.30 points, or 0.1%, to 31,832.74. At its session high, the blue chip benchmark jumped more than 300 points and hit an intraday record high.
Technology stocks bounced back from heavy losses as bond yields stabilized. The 10-year government bond yield fell more than 5 basis points to 1.54%. The key interest rate stood at 1.62% on Monday.
“After lagging heavily over the past few weeks, growth / momentum stocks are exploding higher as investors get a little more comfortable with interest rates and buy what was once the most popular sector,” said Adam Crisafulli, founder of Vital Knowledge. in a note.
The Nasdaq lost 2.4% in the previous session, closing more than 10% below its February 12 high and falling into correction territory. Lately, high-growth names have come under pressure as rising interest rates make their future earnings less valuable today, making it difficult to justify the stocks’ high valuations.
Many popular technology stocks have fallen double digits over the past month on fear of interest rates. Despite Tuesday’s rally, Apple fell more than 10% last month while Tesla fell 20%. The Zoom Video and Peloton pandemic bets fell 20% and 36% respectively over the same period.
“Many of these technology stocks are oversold in the short term, so it’s no great surprise that they are seeing a good rebound,” said Matt Maley, chief marketing strategist at Miller Tabak. “The question will be whether this jump is a strong one … or a ‘dead cat blow’ that doesn’t last long at all.”
Widely pursued investor Cathie Wood of Ark Investment Management told CNBC on Monday that the recent tech sell-off opened “great opportunities” for her to buy the game-only names in her funds, which focus on disruptive tech stocks.
Wood’s flagship fund Ark Innovation (ARKK) posted 10% of its best day ever on Tuesday.
Meanwhile, the rally took a breather as games and cyclical stocks reopened on Tuesday. Energy was the biggest loser, down 1.9%, and reduced its gains to around 8% in March. Financials and industrials also underperformed on Tuesday.
The Senate’s approval of the $ 1.9 trillion Economic Facilitation and Incentive Act had investors continue to turn to these areas of the market looking for an economic recovery. House Democrats want to pass the bill on Wednesday so President Joe Biden can sign it by the weekend.