By Anna Hirtenstein and Amber Burton
Technology stocks continued falling Monday, pulling the Nasdaq Composite into correction territory, as a selloff in U.S. government bonds extended into a sixth week and sapped demand for the once highflying shares.
The Nasdaq dropped 310.99 points, or 2.4%, to 12609.16, extending the declines from its Feb. 12 record to more than 10%. Rising bond yields dent the allure of growth stocks like those of big tech companies.
Apple shares dropped $5.06, or 4.2%, to $116.36, extending their declines for the year to 12%. Netflix and Facebook posted declines of more than 3%, while Tesla, another investor favorite, shed $34.95, or 5.8%, to $563. Shares of the electric-vehicle maker have dropped more than 20% in 2021.
Meanwhile, a rotation in the stock market continued: The Dow Jones Industrial Average surged 306.14 points, or 1%, to 31802.44 following progress on a new fiscal stimulus bill that brightened economic prospects. The blue-chip index -- which is weighted more heavily toward cyclical sectors -- surged as much as 652 points earlier in the session, setting a new intraday record before pulling back.
The S&P 500 fell 20.59 points, or 0.5%, to 3821.35, pulled lower by losses in the tech, communication services and healthcare groups.
In the bond market, the yield on benchmark 10-year U.S. Treasurys ticked up for the fourth consecutive session to 1.594%, its highest since February 2020, from 1.551% Friday. In addition, many investors are continuing to keep an eye on the pace in which rates go up.
"Even though we got somewhat of a respite from the rising-rate reaction, we do think that's really important to keep an eye on," said Lisa Erickson, the head of traditional investments at U.S. Bank Wealth Management. "Certainly the trajectory for rates is up as the economy reopens, so a lot of it just depends on the speed and the pace of how quickly rates go up."
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 more than 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 log a slower pace of growth as pandemic lockdowns end.
"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, General Electric rose 57 cents, or 4.2%, to $14.17. 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 gained $2.92, or 6%, to $51.80, after it said it would combine in an all-stock deal with Apollo Global Management.
Overseas, the pan-continental Stoxx Europe 600 rose 2.1%, led by banking stocks.
In Asia, most major benchmarks fell. The Shanghai Composite dropped 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 anna.hirtenstein@wsj.com and Amber Burton at Amber.Burton@wsj.com
(END) Dow Jones Newswires
03-08-21 1709ET
