S&P Edges Up, Nasdaq Slips as Bond Yields Rise
By Anna Hirtenstein
U.S. stocks started mixed Monday and a selloff in U.S.
government bonds extended into its sixth week after progress toward
a new fiscal stimulus bill brightened economic prospects and sapped
demand for technology stocks.
The S&P 500 rose 0.2%. The benchmark ended Friday up 0.8%
for the week, following a volatile week in which investors rotated
out of big technology stocks.
The Nasdaq Composite Index fell 0.2% at the start of the new
week, pointing to tech stocks extending losses. The Dow Jones
Industrial Average rose 0.4%.
In the bond market, the yield on benchmark 10-year US. Treasurys
ticked up to 1.603% as investors moved funds out of assets
considered to be the safest in the world. Yields rise when bond
prices fall. It had ended Friday at 1.551%, its highest since
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 over 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 see a slower pace of growth as
pandemic lockdowns end.
Ahead of the market open, giant tech stocks including Apple,
Microsoft and Alphabet fell in early trading. Apple, the biggest
company on the S&P 500 by market value, has dropped over 8%
this year. Shares in Tesla, the electric-vehicle maker that was
also a favorite among individual investors last year, slid 1%
premarket. It has lost more than 15% so far in 2021.
"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 moving in premarket trading, General Electric
rose over 3%. 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 soared nearly 17% after it said
it would combine in an all-stock deal with Apollo Global
Overseas, the pan-continental Stoxx Europe 600 rose 1%, led by
banking stocks. Europe's stock market is benefiting from investors
rotating into value stocks, analysts said.
Among individual stocks, ABN Amro climbed over 7%, Banco de
Sabadell rose almost 6% and Deutsche Bank gained over 5%.
In Asia, most major benchmarks fell by the close of trading. The
Shanghai Composite fell 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 firstname.lastname@example.org
(END) Dow Jones Newswires
March 08, 2021 09:49 ET (14:49 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.