Stocks and index ETFs gapped higher on Tuesday after bond yields fell, motivating investors to snatch up technology shares, many of which have been sliding over the last month.
The Nasdaq Composite, which fell over 2.4% on Monday, climbed 3.53% Tuesday as stocks like Tesla surged 14% after a five-day losing streak. Meanwhile Apple, Amazon, Microsoft, and Netflix all added at least 3%. The Dow Jones Industrial Average, which has been holding up the best out of the three major benchmarks, climbed 0.91%. The S&P 500 gained 1.91%.
Major stock ETFs are climbing on Tuesday as well. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are all higher just after 12:15 PM EST.
The tech bounce was credited to a reprieve from bond yields spiking, as the 10-year Treasury yield dropped over 6 basis points to 1.52%, after reaching 1.62% on Monday.
“After lagging badly for the last few weeks, growth/momentum stocks are exploding higher as investors grow a bit more comfortable around rates and step in to buy this erstwhile most-loved sector,” Adam Crisafulli, founder of Vital Knowledge, said in a note.
On Monday, the Nasdaq slipped enough to reach more than 10% below its Feb.12 high, essentially falling into correction territory, as climbing interest rates make their future profits less valuable today, potentially damaging stock valuations.
The fall in tech has been pervasive, with Apple losing 12% in the past month. Tesla has plummeted nearly 30%, dragging down ETFs like the ARK Innovation ETF (NYSEArca: ARKK) in the process.
But analysts are still considering whether this is a buying opportunity or just a short-term reprieve from more downside.
“A lot of these tech stocks have become oversold on a short-term basis. Therefore, it’s not a big surprise that they’re seeing a nice bounce,” said Matt Maley, chief market strategist at Miller Tabak. “The question will be whether this bounce is a strong one…or a ‘dead cat bounce’ that doesn’t last very long at all.”
Sentiment also improved as the Senate approved the $1.9 trillion economic relief and stimulus bill, driving investors to rotate into reopening stocks and cyclical stocks in anticipation of a robust economic recovery.
“Right now the market is broadening out and we think in an underlying sense the bull market is strengthening and that will play to our benefit over the longer term,” said Cathie Wood of Ark Investment Management on CNBC’s “Closing Bell” on Monday.
“We are getting great opportunities” in the sell-off to buy the pure play names in the funds, added Wood, who focuses on disruptive technology stocks. Wood’s flagship fund Ark Innovation (ARKK) popped more than 9% Tuesday.
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