U.S. stocks jumped on Tuesday after bond yields declined, causing investors to buy the dip in beaten-up technology shares.
The Dow Jones Industrial Average rose 152 points, or 0.5%. The S&P 500 gained 1.2%. The tech-heavy Nasdaq Composite climbed 2.5%. Tesla shares popped 6.8%, while Apple, Amazon, Microsoft, Netflix and Alphabet all gained at least 2%.
Technology shares rebounded from sharp losses as bond yields stabilized. The 10-year Treasury yield fell more than 6 basis points to 1.52%. It traded as high as 1.62% on Monday.
"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."
On Monday, the Dow rallied more than 300 points on investor optimism about the economic comeback from the pandemic. Yet tech shares didn't participate on Monday, with the Nasdaq Composite shedding 2% as a rapid rise in rates caused investors to rotate out of pricey tech shares.
The tech benchmark closed more than 10% below its Feb.12 closing high, falling into correction territory. High-growth names have been pressured lately as rising rates make their future profits less valuable today, compressing the stocks' lofty valuations.
"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) gained 4%.
Hedge fund manager David Tepper said on Monday the recent sharp rise in rates is likely over and it’s hard to be bearish on stocks right now. Tepper noted names like Amazon were starting to look attractive.
Over the weekend, the Senate passed a $1.9 trillion economic relief and stimulus bill, which is set to include another round of stimulus checks. President Joe Biden is expected to sign the bill into law by March 14.
The stimulus news prompted investors to rotate into reopening plays and cyclical stocks to bet on a sharp economic rebound. Banks, airlines, cruise lines and retailers led the gains on Monday.