US stocks fell on Tuesday, led by tech names as the market returned some of the strong gains from the previous session.
The S&P 500 was down 0.6% after the broad equity benchmark rose more than 2% on Monday for its best day since June. The Dow Jones Industrial Average was flat and the tech-heavy Nasdaq Composite fell 0.8% as Apple and Microsoft fell 1% each.
Technology and real estate were the two worst performing sectors, falling more than 1% each. Slight increases in materials and consumer staples gave the broader market some cushion.
The 10-year Treasury yield, which has been a focus for stock investors lately, fell to 1.41%. The policy rate appeared to be stabilizing this week after hitting a high of 1.6% last week, allaying some fears about higher borrowing costs and inflation. Investors will continue to monitor movements in the bond market.
“Volatility has re-emerged as rising interest rates begin to change the dynamics of valuations and expectations for future inflation,” said Craig Johnson, technical marketing strategist at Piper Sandler, in a note. “While another round of economic activity should help the economic recovery continue, it also increases the risk of spurring inflation and changing the FOMC’s cautious narrative.”
Target’s stocks reversed early gains and traded more than 4% lower, despite booming sales. The retailer declined to give a forecast for 2021.
US stocks started March on Monday with a sharp rise: the S&P 500 rose 2.4%, the Dow Jones Industrial Average rose nearly 2%, and the tech-heavy Nasdaq rose just over 3% after he lost 4.9% last week. Both the Dow and the Nasdaq celebrated their best trading day since November.
The economically sensitive cyclical sectors continued to outperform the broader market amid optimism about vaccines and economic recovery. Energy and finance are up 28% and 12% respectively since the beginning of the year.
Some on Wall Street believe the jump in returns reflects improved economic growth and rising earnings forecasts, and that stocks should be able to absorb higher interest rates over the long term if they rise at a reasonable pace.
“It’s not just interest rates that matter to investors, but the pace of the rise, the steepness of the curve and the reasons for the movement,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments.
“Investors should expect indigestion moments when the good news slows, but stick to fundamentals: Accommodation policies and improving earnings are good news for risk-weighted assets,” she added.
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