Technology Stocks Enter Fourth Week of Declines as the DOW Hits a New Record
The DOW hit a new high today as the Nasdaq Index entered the fourth week of declines.
Nasdaq Enters a Correction
A "correction" is usually defined as a 10% decline. It becomes a "bear market" at a 20% decline.
The Nasdaq dropped 310.99 points, or 2.4%, to 12609.16, extending the declines from its Feb. 12 record to more than 10%. Rising bond yields dent the allure of growth stocks like those of big tech companies.
Apple shares dropped $5.06, or 4.2%, to $116.36, extending their declines for the year to 12%. Netflix NFLX -4.47% and Facebook FB -3.39% posted declines of more than 3%, while Tesla, another investor favorite, shed $34.95, or 5.8%, to $563. Shares of the electric-vehicle maker have dropped more than 20% in 2021.
Meanwhile, a rotation in the stock market continued: The Dow Jones Industrial Average surged 306.14 points, or 1%, to 31802.44 following progress on a new fiscal stimulus bill that brightened economic prospects. The blue-chip index—which is weighted more heavily toward cyclical sectors—surged as much as 652 points earlier in the session, setting a new intraday record before pulling back.
The S&P 500 fell 20.59 points, or 0.5%, to 3821.35, pulled lower by losses in the tech, communication services and healthcare groups.
Divergence Won't Last
This divergence won't last. Either the S&P and Dow join the correction party or hiding out in the Dow will fail.
My guess is hiding out in the Dow will fail.
However, some analysists blame this all on rising yields as bonds entered into a sixth week of declines allegedly sapping demand for technology shares.
My Treasury guess, and I have done far better at interest rate calls than stock market calls, is that we are nearing the end of rising yields for at least some time.
For discussion, please see Small Speculators Pile Into Treasury Shorts, Is a Short Squeeze Coming?