Wall Street drops as tech stocks hit by spike in yields

(Reuters) – Wall Street’s main indexes slipped on Tuesday as investors pulled out of heavyweight tech-related stocks and flocked to undervalued banks and industrial stocks amid a rise in U.S. bond yields.

FILE PHOTO: American flags hang from the facade of the New York Stock Exchange (NYSE) building after the start of Thursday’s trading session in Manhattan in New York City, New York, U.S., January 28, 2021. REUTERS/Mike Segar/File Photo

Apple Inc, Microsoft Corp, Amazon.com and Broadcom Inc dropped between 0.9% and 2.7%, as U.S. 10-year Treasury yield hit a 14-month high.

The Nasdaq is set for its first monthly loss since November as a rise in yields since last month has particularly hit tech stocks which often have a low-rate environment heavily baked into their high valuations.

The index is still about 7% below its all-time closing high, while bets on a speedy economic recovery driven by vaccine distributions and unprecedented stimulus has helped the S&P 500 and the Dow notch record closing highs last week.

“We are going through a period where people are adjusting to slightly higher rates,” said Jon Maier, chief investment officer at Global X ETFs in New York.

“An infrastructure plan would benefit the sectors that were typically locked during the pandemic. Materials, industrials are the areas that would benefit from additional spending.”

On Wednesday, President Joe Biden will unveil more details about the first stage of his infrastructure plan, which could be worth as much as $4 trillion.

Economy-linked financials and industrials were the only sectors in positive territory, while technology and utilities posted the steepest declines.

Bank stocks rebounded 1.7% as investors took heart from signs that the impact from the fall of a U.S. hedge fund didn’t ripple out to broader markets.

“It’s a transitional market … we would see this broadening of the market continue throughout this year,” said John Traynor, chief investment officer at People’s United Advisors.

At 10:07 a.m. ET, the Dow Jones Industrial Average fell 111.33 points, or 0.34% , to 33,060.04, the S&P 500 lost 20.71 points, or 0.53%, to 3,949.97 and the Nasdaq Composite lost 107.32 points, or 0.82%, to 12,952.33.

Banks and industrial stocks including JPMorgan Chase & Co, Morgan Stanley and Boeing Co added between 0.2% and 0.7%.

Bitcoin prices gained about 2.6% after Reuters reported that PayPal Holdings Inc is set to announce that it has started allowing U.S. consumers to use their cryptocurrency holdings to pay at millions of its online merchants globally.

PayPal gained about 1%.

Declining issues outnumbered advancers by a 1.2-to-1 ratio on the NYSE and by a 1.6-to-1 ratio on the Nasdaq.

The S&P 500 posted 17 new 52-week highs and no new low, while the Nasdaq recorded 33 new highs and 61 new lows.

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