Nasdaq Falls 2.7% as Bond Yields Rise
By Will Horner and Amber Burton
Technology stocks dropped sharply again Wednesday as government
bond yields ticked higher.
Investors have been jittery in recent days, with the major
stocks indexes swinging between losses and gains. Some money
managers have grown concerned that stimulus measures will lead to a
spike in inflation. Worries about inflation have also triggered
bets that the Federal Reserve will start to boost interest rates in
the next two years.
"It's general nervousness about the rise in interest rates,"
said Tom Martin, senior portfolio manager at Globalt Investments,
of the volatile market. "Clearly today we're back at favoring value
over growth and that makes sense in the context of today's change
in interest rates."
The Nasdaq Composite fell 361.04 points, or 2.7%, to 12997.75,
falling for a second consecutive day. The tech-heavy index has
slumped 7.8% from its Feb. 12 peak. The S&P 500 dropped 50.57
points, or 1.3%, to 3819.72. The Dow Jones Industrial Average fell
121.43 points, or 0.4%, to 31270.09.
The yield on the 10-year U.S. Treasury note rose to 1.469% from
1.413% Tuesday -- though off from Thursday's high of 1.513%. Yields
rise when bond prices fall.
Top central bank officials have said the rise in yields reflects
optimism about economic prospects and that they plan to keep
monetary policy loose to support the economy for the foreseeable
future. Federal Reserve Gov. Lael Brainard said Tuesday that the
recent tumult in the bond market is on her radar. She said she
would be concerned if she "saw disorderly conditions or persistent
"This higher volatility is to be expected," said Seema Shah,
chief strategist at Principal Global Investors. "What has taken us
unawares is the timing of it because most people were expecting to
see these issues come later in the year, or early next year."
Sentiment was briefly buoyed earlier in the day by signals that
Democrats will seek to bridge differences over jobless benefits and
other issues as they aim to complete a $1.9 trillion relief package
in coming days. President Biden also said the U.S. would have
enough Covid-19 vaccines for all American adults by the end of May,
two months earlier than he had previously said.
"The vaccine rollout is going extremely well compared to many
expectations," said Mrs. Shah. "And at a time when it looks like
the economy could recover on its own, we also have the prospect of
fiscal stimulus in the background, and it is leading many people to
upgrade their U.S. growth expectations."
Optimism about the better economic prospects is particularly
fueling demand for shares of companies that would benefit when the
economy returns to normal, said Chris Dyer, director of global
equities at Eaton Vance. That includes banking and energy stocks,
which are outperforming the technology sector this year.
"We can see light at the end of the tunnel of the pandemic," Mr.
Dyer said. "The progress that has been made on vaccinations has led
to confidence in the economic recovery and you have seen companies
geared into that economic recovery do well in the last months."
In company news, Lyft rose $4.70, or 8.2%, to $61.76 after the
ride-sharing company disclosed strong February ride figures late
Tuesday. Competitor Uber also rose $1.46, or 2.7%, to $56.11.
Data on activity in the services sector from the Institute for
Supply Management showed the services sector activity expanded for
a ninth consecutive month in February.
The Fed's beige book revealed the U.S. economy continued to grow
modestly at the start of the year, but some industries like leisure
and hospitality continued to be challenged by Covid-19
In commodity markets, Brent crude, the international benchmark
for oil, rose 2.2% to $64.07 a barrel. Gold prices fell 1%.
Overseas, the pan-continental Stoxx Europe 600 climbed less than
Most major Asian indexes gained. China's Shanghai Composite
Index rose almost 2%, while in Hong Kong, the Hang Seng jumped
2.7%. Japan's Nikkei 225 edged up 0.5%, and South Korea's Kospi
Write to Will Horner at William.Horner@wsj.com and Amber Burton
(END) Dow Jones Newswires
March 03, 2021 17:12 ET (22:12 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.