Apple, Google parent Alphabet, Facebook lead tech slump on Wall Street
(AP) — Major U.S. stock indexes closed mostly lower Monday as another rise in bond yields helped set off more heavy selling in technology companies.
The S&P 500 fell 0.5% after having been up 1% earlier. Because of their huge size, drops by Apple, Google’s parent company and other major technology stocks helped drag the S&P 500 into the red, even though more stocks rose than fell in the benchmark index.
The selling, which accelerated toward the end of the day, left the tech-heavy Nasdaq composite down 10.5% from the all-time high it reached on Feb. 12. A drop of 10% or more from a recent peak is known on Wall Street as a “correction.”
Bond yields rose broadly. The yield on the 10-year Treasury note climbed to 1.60% from 1.55% late Friday.
Yields have been marching higher with rising expectations for the economy’s growth and for the inflation that could accompany it. Higher yields put downward pressure on stocks generally, in part because they can steer away dollars that had been headed for the stock market into bonds instead. That makes investors less willing to pay as high prices for stocks, especially those that look the most expensive, such as technology stocks.
Investors can expect more market volatility as long as bond yields keep rising, said Sylvia Jablonski, chief investment officer at Defiance ETFs. “I do think it’s something that’s going to be temporary.”
Still, she said, the pullback in technology stocks offers an attractive entry point for investors to snap up shares in some big names, like Apple and Amazon, at a better price.
“There are some solid buy-on-the-dip opportunities here,” Jablonski said.
The S&P 500 fell 20.59 points to 3,821.35. The Dow Jones Industrial Average rose 306.14 points, or 1%, to 31,802.44. The index briefly climbed more than 650 points. The Nasdaq lost 310.99 points, or 2.4%, to 12,609.16.
Smaller company stocks, which have led the market higher this year, notched more gains. The Russell 2000 index added 10.77 points, or 0.5%, to 2,202.98.
Financial stocks had some of the best gains. Wells Fargo rose 3.3% and Citigroup gained 2.8%.
Trading has been choppy in recent weeks as investors fret over the sudden spike in long-term interest rates in the bond market. The S&P 500 is coming off its first weekly gain in three weeks.
Technology companies have been heading lower as investors start to doubt whether the huge gains they made during the pandemic months can continue if inflation surges. Apple fell 4.2%, Google’s parent Alphabet dropped 4.3% and Facebook slid 3.4%.
The latest move higher in bond yields fanned those concerns Monday.
“Interest rates reflect a real economic recovery and they’re not going back down anytime soon,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “Right now, the market is struggling with that.”
Investors have been betting that trillions of dollars in coming government stimulus will help lift the economy out of its coronavirus-induced malaise. There are also investors who are betting that stimulus and an improving economy will result in some amount of inflation down the road.
The U.S. economic aid package, passed narrowly by the Senate on Saturday, provides direct payments of up to $1,400 for most Americans and extends emergency unemployment benefits. It’s a victory for President Joe Biden and his Democratic allies, and final congressional approval is expected this week.
“That eliminates a major short-term risk and also puts a lot of money into the economy in the short term,” McMillan said.
Rising oil prices are a part of that picture. After plunging with the onset of the pandemic, as demand plummeted, prices have been recovering in the past few months.
Last week, with oil prices rising, some observers were expecting the OPEC cartel and its allies to lift more restrictions and let the oil flow more freely. But OPEC agreed to leave most restrictions in place, despite growing demand.
Benchmark U.S. crude oil for April delivery fell $1.04, or 1.6% to $65.05 a barrel Monday. It’s still up 32.8% so far this year.