The Nasdaq Composite led the S&P 500 higher on Monday amid falling government bond yields as Wall Street seemed to bounce back after a lost week.
The tech-heavy benchmark gained 0.8% as the 10-year return fell. The S&P 500 rose 0.4%. The Dow Jones Industrial Average gained 30 points.
Tesla’s shares rose more than 4% as interest rates fell and as Cathie Woods Ark Invest set a new price target on the stock that was to quadruple over four years. Apple, Facebook and Microsoft all gained at least 1%.
The 10-year government bond yield fell 3 basis points to around 1.7% after hitting a 14-month high last week (1 basis point equals 0.01%). The rise in interest rates has raised concerns about valuations of growth and technology stocks.
“After the reopened exuberance subsided and interest rates subsided, investors will be moving back to large-cap technology stocks with strong free cash flow, recurring income and increasing user penetration,” said Richard Saperstein, chief investment officer at Treasury Partners.
The three main indices lost ground last week. The Dow and S&P 500 slid on Friday, ending the week 0.5% and 0.8% respectively, breaking two-week winning streaks. The Nasdaq Composite lost 0.8%.
The struggle for stocks came as bond yields rose again last week, putting pressure on the high-growth stocks that brought the market back from its pandemic-triggered sell-off last year.
Despite last week’s weakness, the S&P 500 and Dow are still near record highs, and the Nasdaq is not too far away. Darrell Cronk, chief investment officer of Wells Fargos Wealth and Investment Management, said the stock market is still on track for multi-year growth.
“If you went down the list and started putting check-check-check-check boxes, you’d look at this in a vacuum … and say it looks like an early recovery cycle that goes on for about a year and probably a number of years left to run, “said Cronk.
Optimism about markets and the path of the US economy has increased as vaccines roll out across the country. In the past few weeks, the American pace has increased. However, there has been an increase in Covid-19 cases in several states.
U.S. study data released on Monday showed that the Covid vaccine developed by AstraZeneca and Oxford University is 79% effective in preventing symptomatic illness and 100% effective against serious illness and hospitalization.
