Technology rebound leads stocks higher on Wall Street

TOKYO — A surge in big technology stocks was pulling the stock market sharply higher on Tuesday, as a fall in bond yields was helping beaten-down technology companies recover.

The surge comes a day after the Nasdaq closed 10% below its February peak, what is known as a “correction” on Wall Street.

The S&P 500 was up 1.9% as of 12:52 p.m. Eastern. The technology-heavy Nasdaq was up 3.7%, led by gains in Apple, Amazon, Facebook and Cisco. The Dow Jones Industrial Average, which is weighted less toward tech than the other two indexes, gained 290 points, or 0.9%, to 32,095. The Russell 2000 index of small company stocks was up 2.5%.

Investors were relieved to see that long-term interest rates were falling in the bond market. The yield on the 10-year Treasury note dropped to 1.55% after trading above 1.60% a day earlier. Higher bond yields tend to pull money away from high-priced stocks like technology companies, which have been soaring through the pandemic.

Bank stocks, which had benefited from the rise in bond yields, were moving in the opposite direction as the rest of the market. Bank of America fell 1% while Citigroup slipped 0.6%.

Yields have been climbing with rising expectations for growth and the inflation that could follow. Higher yields put downward pressure on stocks generally, in part because they can steer away dollars that might have gone into the stock market into bonds instead. That makes investors less willing to pay such high prices for stocks, especially those that look the most expensive, such as technology stocks.

“We’re going through a regime change and it’s not dissimilar to what we saw last year,” said Kristina Hooper, chief global market strategist at Invesco. “Now we’re seeing the reverse of that and an abrupt move like that creates an environment in which investors start to worry about valuations.”

Striking the “correction” level for the Nasdaq is also important for many investors and traders who use technical indicators to decide when to buy or sell stocks. A correction is typically seen as a healthy moment for any market, giving investors a chance to pause and reallocate their investments without the volatility and stress that a bear market typically can bring.

Bond yields will likely continue rising throughout the year as part of the improving economy.

“It’s not a bad thing, it’s normal and in this environment it’s positive because it’s reflecting a far improved economic outlook,” said Hooper, said.

Investors have been betting that $1.9 trillion 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 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.

Oil prices were also moving modestly lower, continuing a two-day slide. U.S. crude oil fell 1.5% to $64.08 a barrel.