Technology stocks led the S&P 500 higher on Monday amid falling Treasury yields as Wall Street looked to bounce back from a losing week.
The tech-heavy Nasdaq Composite gained 1.1% as the 10-year yield retreated. The S&P 500 rose 0.6%. The Dow Jones Industrial Average edged up 90 points.
Shares of Tesla added more than 4% as rates fell and as Cathie Wood’s Ark Invest put out a new price target on the stock which calls for it to quadruple in four years. Apple, Facebook and Microsoft all gained at least 1%.
The 10-year Treasury yield fell 3 basis points to around 1.7%, after touching a 14-month high last week (1 basis point equals 0.01%). The move higher in rates in recent weeks has raised concerns about valuations on growth and tech stocks.
“After the reopening exuberance fades and interest rates level off, investors will rotate back into large cap technology stocks with strong free cash flow, recurring revenues and increasing user penetration,” said Richard Saperstein, chief investment officer at Treasury Partners.
The three major indexes lost ground last week. The Dow and S&P 500 slipped on Friday to finish the week down 0.5% and 0.8%, respectively, breaking two-week winning streaks. The Nasdaq Composite lost 0.8%.
Declines in the equity market came as bond yields jumped again last week, pressuring the high-growth stocks that led the indexes back from their pandemic-sparked sell-off last year.
Even with the weakness last week, the S&P 500 and Dow are still near record highs, and the Nasdaq isn’t too far off. Darrell Cronk, chief investment officer of Wells Fargo’s Wealth and Investment Management, said the stock market still appeared to be on track for a multiyear climb.
“If you went down the list and started putting boxes of check-check-check-check, you would look at this in a vacuum … and say it looks like an early recovery cycle that’s roughly a year in that probably has a number of years yet to run,” Cronk said.
Optimism about the markets and the path of the U.S. economy has been growing as vaccines are rolling out across the country, with the pace of Americans getting shots climbing in recent weeks. Several states are seeing an increase in Covid-19 cases, however.
U.S. trial data released Monday showed the Covid vaccine developed by AstraZeneca and the University of Oxford is 79% effective in preventing symptomatic illness and 100% effective against severe disease and hospitalization.