Bounce in tech stocks pushes Wall Street higher
US stocks and Treasuries rebounded as a powerful “spin” triggered by an improving economic outlook and inflation fears came to a halt on Tuesday.
Wall Street’s S&P 500 Index rose 1.1% at the opening bell, leaving the blue chip index on track for only its second gain in six sessions. The Nasdaq Composite rose 2.3%, a day after the tech-focused benchmark slumped into corrective territory – a 10% drop from its February high.
Stocks that underperformed during the height of the pandemic – like banks and airlines – have started to gain momentum and dominate the market.
The European banking and energy sectors have grown by 20% and 13% respectively this year. “We can definitely call this rotation,” said Jim Reid, research strategist at Deutsche Bank.
The broader benchmark Stoxx Europe 600 recovered from a morning slide to rise 0.6% in the afternoon, while London’s FTSE 100 added 0.1% and Xetra Dax from Frankfurt rose 0.5%, prolonging the record of the German index reached the day before.
“The lower opening this morning is an overhang from the interest rate concerns from the previous day,” said Armin Peter, global head of the debt union at UBS. “But I can see the underperformance of technology lingering a bit longer and European stocks will outperform US indices, due to the relatively lower share of technology stocks in European indices.”
The recent public debt rout has come to a halt, helping to ease the upward pressure on US borrowing costs. The benchmark 10-year Treasury bill yield, which moves inversely to price, fell 0.05 percentage points to 1.54%.
Bond traders said they would review the results of a three-year Treasury auction later on Tuesday. This is the first of three crucial US bond deals this week following a grim auction of seven-year treasury bills late last month, which added to the recent volatility in the debt market. .
Investors unloaded Treasuries this year as President Joe Biden promoted his $ 1.9 billion coronavirus relief package, which is expected to pass through the Democratic-controlled House of Representatives on Tuesday. Expectations that the huge stimulus measures would trigger a faster economic recovery and fuel inflation have pushed the sale of US government debt.
According to the OECD, the scale of the US stimulus package will add 1 percentage point to global economic growth in 2021.
In Asia, China’s CSI 300 closed down 2.2%, Hong Kong’s Hang Seng rose 0.8% and South Korea’s Kospi lost 0.6%.