The S&P 500 dropped 0.5%, while the Nasdaq composite shed 10.5% from the all-time high
Major U.S. stock indexes finished mostly lower Monday as another rise in bond yields helped set off more heavy selling in technology companies.
The S&P 500 dropped 0.5% after rising 1% earlier. Drops by Apple, Alphabet 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 left the Nasdaq composite down 10.5% from the all-time high it hit 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 jumped to 1.60% from 1.55% late Friday.
Yields have been rising with growing 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 dropped 20.59 points to 3,821.35. The Dow Jones Industrial Average advanced 306.14 points, or 1%, to 31,802.44. The index briefly jumped over 650 points. The Nasdaq shed 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 gained 10.77 points, or 0.5%, to 2,202.98.
Financial stocks gained the most. Wells Fargo advanced 3.3% and Citigroup added 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 soars. Apple shed 4.2%, Google’s parent Alphabet fell 4.3% and Facebook dropped 3.4%.
The latest move higher in bond yields fuelled 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.