U.S. stocks fell on Tuesday as a jump in bond yields prompted investors to dump high-flying tech shares.
The Dow Jones Industrial Average dipped 70 points, slipping from a record closing high. The S&P 500 fell 0.4%, while the tech-heavy Nasdaq Composite dropped 0.9%. Apple and Microsoft slid more than 1%. Tesla fell more than 2%.
The 10 year Treasury yield jumped 6 basis points to top 1.77%, the highest level in 14 months as vaccine rollouts and expected infrastructure spending boosted expectations of a broad economic recovery and rising inflation.
The market experienced heightened volatility amid the continued fallout after a hedge fund was forced to liquidate its position in several media stocks.
ViacomCBS and Discovery both rebounded on Monday after registering heavy losses last week prompted by Archegos Capital Management selling large blocks of stock late last week, as reported by CNBC and other outlets.
Some bank stocks also bounced back. Goldman Sachs climbed 2.2%. JPMogan and Bank of America rose more than 1% each.
Credit Suisse and Nomura posted heavy losses this week after warning of “significant” hits to first-quarter results following the hedge fund’s selling.
Still, despite the recent volatility, the Dow and S&P 500 are firmly higher for the month, gaining 7.2% and 4.2%, respectively.
Investors digested a reading on consumer confidence that far exceeded expectations. The Conference Board’s Consumer Confidence Index surged in March to 109.7, its highest reading in a year. Economists polled by Dow Jones expected the index to rise to 96.8 from 90.4 in February.
“The significant tailwinds propelling equities higher and the forces that have driven equities into, during, and now out of the pandemic remain,” analysts at Evercore ISI wrote in a note to clients.
“Investors seem to understand that faster growth, rising earnings growth expectations, still historically low corporate borrowing costs, and pent up consumer demand will fuel further market gains,” the firm added.
Evercore envisions the pace of gains slowing, however, with equities already pricing in a reacceleration of growth.
Small cap stocks have been a beneficiary of the reopening trade in recent months as investors rotated into some of the hardest hit areas of the market. The Russell 2000 has gained 43% over the last six months, more than doubling the return of the Dow and S&P.
Traders are bracing for heightened volatility during this holiday-shortened week with quarter-end rebalancing among pension funds and other big investors. The recent swift advance in bond yields could set up money managers for big adjustments in their portfolios.