Dow Rises More Than 500 Points; Tech Stocks Fall
March 08 2021 - 3:04PM
Dow Jones News
By Anna Hirtenstein and Amber Burton
The Dow Jones Industrial Average climbed Monday to record
levels, while a selloff in U.S. government bonds extended into its
sixth week and sapped demand for technology stocks.
The blue-chip index surged 514 points, or 1.6%, to 32010, on
course to close above 32000 for the first time, following progress
on a new fiscal stimulus bill that brightened economic prospects.
The S&P 500 climbed 0.3%.
Meanwhile, the Nasdaq Composite fell 1.3% as tech stocks
extended their declines. Rising bond yields dent the allure of
growth stocks like those of big tech companies.
Apple shares dropped 3.4%, extending their declines for the year
to 11%, while Tesla, the electric-vehicle maker that is a favorite
among individual investors, slid 4.3%. It has lost more than 15% in
2021. Netflix and Facebook declined more than 2%.
In the bond market, the yield on benchmark 10-year U.S.
Treasurys ticked up to 1.599% as investors sold bonds. The yield
ended Friday at 1.551%, its highest since February 2020. In
addition, many investors are continuing to keep an eye on the pace
in which rates go up.
"Even though we got somewhat of a respite from the rising-rate
reaction, we do think that's really important to keep an eye on,"
said Lisa Erickson, the head of traditional investments at U.S.
Bank Wealth Management. "Certainly the trajectory for rates is up
as the economy reopens, so a lot of it just depends on the speed
and the pace of how quickly rates go up."
President Biden's $1.9 trillion Covid-19 relief plan was
approved in the Senate over the weekend and faces a vote in the
House as early as Tuesday. The additional fiscal spending is
expected to bolster the pace of economic recovery and boost
inflation. As the outlook brightens, money managers are moving out
of government bonds and technology stocks and into sectors such as
banks and energy that are likely to rebound with the economy.
"Stimulus checks into people's bank accounts will be a big
propeller of growth, given the consumer in the U.S. makes up such a
big part of U.S. growth," said Shaniel Ramjee, a multiasset fund
manager at Pictet Asset Management. "The underlying strength of the
U.S. economy, growing expectations that the stimulus gets fully
passed, plus inflation expectations rising because of oil: these
are all likely to continue to push bond yields higher."
Tech stocks have been retreating in recent weeks as vaccination
programs advance and economic data point to the recovery being
under way. The Nasdaq Composite Index declined more than 2% last
week, losing ground for a third consecutive week. That is because
investors are betting that the largest media, communications and
online-shopping companies will log a slower pace of growth as
pandemic lockdowns end.
Tech and communications stocks were the only declining sectors
in the S&P 500 Monday.
"The main market element is what's happening in the yield
market: The U.S. tech side is suffering from the current
normalization in the cost of capital," said Samy Chaar, chief
economist at Lombard Odier. "The market is currently acknowledging
that we're in a recovery. Flows are rebalancing to better reflect
this cyclical recovery."
Among other stocks, General Electric rose 4.6%. The Wall Street
Journal reported that the industrial conglomerate was nearing a $30
billion deal to combine its aircraft-leasing business with
Ireland's AerCap.
Investment firm Athene Holding climbed more than 7% after it
said it would combine in an all-stock deal with Apollo Global
Management.
Overseas, the pan-continental Stoxx Europe 600 rose 2.1%, led by
banking stocks.
In Asia, most major benchmarks fell. The Shanghai Composite
dropped 2.3% and Hong Kong's Hang Seng Index declined 1.9% as
investors grappled with signs that Chinese policy makers will take
more action to rein in debt and prevent asset bubbles from
forming.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Amber
Burton at Amber.Burton@wsj.com
(END) Dow Jones Newswires
March 08, 2021 14:49 ET (19:49 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.