New York (CNN Business)Wall Street was in rally mode Monday — for the most part. Tech stocks and other momentum darlings — the so-called FAANG stocks — weren’t invited to the party.
The Dow surged nearly 550 points, or 1.7%, in midday trading as investors cheered the Senate’s passage of a Covid-19 relief package that aims to bolster the US economy. The S&P 500, the broadest measure of Wall Street, also rallied a bit, gaining 0.5%.
But a selloff in tech stocks continued Monday, dragging the Nasdaq down 1.1%. In fact, Apple (AAPL), Microsoft (MSFT), Salesforce (CRM) and Intel (INTC) were the only Dow stocks that were in the red.
And Tesla, down 3%, was one of the big laggards in the S&P 500. Tesla (TSLA) has now fallen nearly 18% so far this year.
Investors appear to be worried about what will happen to big techs and other growth stocks in an environment when inflation pressures are creeping up and bond yields are heading higher.
The 10-year Treasury yield rose to about 1.6% after the Senate cleared President Biden’s $1.9 trillion stimulus proposal, paving the way for the sweeping legislation to be signed into law early this week.
Long-term rates are still relatively low, but investors are alarmed by how rapidly bond yields have climbed. The 10-year yield began the year around 0.9%. And some experts are forecasting that they could soon head as high as 2%.
Still, an improving economy should be good news for investors — even if big tech stocks continue to pull back.
Investors may be engaging in what’s called sector rotation: flocking to find new market leaders that should benefit from higher inflation and an improving economy, such as banks, consumer companies and energy stocks.
Optimism about Covid-19 vaccines is also giving Wall Street hope that consumers can soon return back to more normal lives and do things like go to movies, take vacations and go shopping more freely again.
Along those lines, Disney (DIS), Coca-Cola (KO) and Home Depot (HD) were among the top Dow gainers Monday.
But some investors think that the recent sell-off in big tech may be overdone.
“There is a rotation — but the good tech stocks are still attractive, so that is frustrating,” said Randy Warren, CEO of Warren Financial. “Do you really think Apple is no longer a good company? Google, Microsoft and Amazon are still making a ton of money.”
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