Tech stocks dragged down the S&P 500 on Wednesday amid rising bond yields, while names tied to an economic recovery provided the market with some support.
The S&P 500 fell 1.3% to 3,819.72, led by tech and consumer discretionary. The Nasdaq Composite slid 2.7% to 12,997.75 as Apple, Amazon, Microsoft and Alphabet all dropped more than 2%. Netflix shed 5%.The Dow Jones Industrial Average ended the day near its session low, dipping 121.43 points, or 0.4%, to 31,270.09.
The weakness came as the 10-year Treasury yield extended its advance. The benchmark rate climbed more than 8 basis points to a high of 1.49% Wednesday before retreating slightly. Last week, the yield surged to a high of 1.6% in a move that some described as a “flash” spike.
The continuous rise in bond yields is raising concerns about equity valuations and a pickup in inflation. Higher bond yields can hit technology stocks particularly hard as they have been relying on easy borrowing for superior growth.
“Interest rates just won’t cut a break for this market,” Jim Cramer said on CNBC’s “Squawk Alley.”
President Joe Biden said late Tuesday that the U.S. will have a large enough supply of coronavirus vaccines to inoculate every adult in the nation by the end of May. That would be two months ahead of schedule. The vaccine rollout is seen as key part in getting Americans back to work and for the economy to recover.
Growing optimism over the vaccine rollout sparked a rally in cyclical stocks and reopening plays. American Airlines popped 3.4%, while Carnival and Norwegian Cruise Line jumped 3.9% and 6.3%, respectively. The energy sector rose 1.4%.
“While the S&P 500 may be facing structural head-winds due to tech weakness, much of the rest of the market is actually doing quite well,” Tom Essaye, founder of Sevens Report, said in a note. “Overall, most non-tech stocks are weathering the increase in bond yields quite well.”
On the data front, private companies added 117,000 new jobs in February, according to a report Wednesday from payroll processing firm ADP. Economists polled by Dow Jones expected 225,000 private jobs were added last month.
Meanwhile, the pace of growth in the services side of the U.S. economy decelerated in February. The ISM Nonmanufacturing Index showed a reading of 55.3 for last month, down 3.4 percentage points from January and below the 58.7 Dow Jones estimate.
Biden agreed to limit the number of people who will receive a new round of stimulus checks as part of the $1.9 trillion coronavirus relief package set to pass in the coming days, a Democratic source said Wednesday.