Tech stocks dragged the S&P 500 down Wednesday amid rising bond yields, while names tied to an economic recovery provided some support to the market.
The S&P 500 fell 1.3% to 3,819.72, led by technology and consumer staples. The Nasdaq Composite was down 2.7% to 12,997.75 as Apple, Amazon, Microsoft and Alphabet each fell more than 2%. Netflix lost 5%. The Dow Jones Industrial Average ended the day near its session low, falling 121.43 points, or 0.4%, to 31,270.09.
The weakness came when the Treasury Department's 10-year rate of return extended their advance. The key rate rose more than 8 basis points on Wednesday to a high of 1.49% before pulling back slightly. Last week the yield rose to a high of 1.6% in what some referred to as the "flash" spike.
The steady rise in bond yields raises concerns about equity valuations and a rebound in inflation. Higher bond yields can hit technology stocks especially hard as they rely on simple borrowing for superior growth.
"Interest rates are just not going to pause for this market," said Jim Cramer on CNBC's Squawk Alley.
President Joe Biden said late Tuesday that the U.S. will have sufficient supplies of coronavirus vaccines to vaccinate every adult in the nation by the end of May. That would be two months earlier than planned. The introduction of vaccines is seen as a key element in getting Americans back to work and the economy recovering.
Growing optimism about the vaccine launch sparked a rally in cyclical stocks and the reopening of the Games. American Airlines gained 3.4%, while Carnival and Norwegian Cruise Line gained 3.9% and 6.3%, respectively. The energy sector grew by 1.4%.
"While the S&P 500 may face structural headwinds due to technical weaknesses, the rest of the market is actually doing reasonably well," Tom Essaye, founder of Sevens Report, said in a note. "Overall, most non-tech stocks are weathering the rise in bond yields quite well."
On the data front, private companies created 117,000 new jobs in February, according to a report by payroll firm ADP on Wednesday. Economists polled by Dow Jones expected 225,000 private jobs to be added last month.
Meanwhile, the rate of growth on the service side of the US economy slowed in February. The ISM Nonmanufacturing Index showed a value of 55.3 last month, a decrease of 3.4 percentage points from January and below the Dow Jones estimate of 58.7.
Biden agreed to limit the number of people who will receive a new round of stimulus checks under the $ 1.9 trillion coronavirus aid package due to be passed in the coming days, said a Democratic source on Wednesday with.
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