Tech Malaise Weighs Heavy On Wall Street

Technology-related shares sold off on Monday in a big downturn that pushed the Nasdaq into corrective territory and offset stocks that rose on hopes the US$1.9 trillion Covid-19 relief bill will spur the US economy.

The big technology stocks that have led Wall Street to scale successive peaks over the past year's rally fell with the Nasdaq closing down 2.41 percent, roughly 10.5 percent below its February 12 record close of 14,095.

Financial shares and restaurant and travel-related stocks that are expected to do well when the economy reopens rose but were unable to offset the weight of the bigger tech shares that dominate the US stock market.

After the legislation won US Senate approval on Saturday, President Joe Biden said he hoped for a quick passage of the revised coronavirus relief package by the Democrat-controlled House of Representatives so he could sign it and send US$1,400 direct payments to Americans.

Prospects of more government spending and faster economic growth have stoked fears of a spike in inflation, sending the benchmark 10-year Treasury yield to near one-year highs.

US Treasury Secretary Janet Yellen, however, said on Monday the package would fuel a "very strong" US recovery and she did not expect the economy to run too hot because of the increased spending.

In the S&P 500, the financial sector was the biggest boost, hitting a record as higher market interest rates and a steeper yield curve helped banks. Industrials were right behind, also reaching a record high, while the materials sector neared an all-time peak. The technology sector was deepest in the red.

The Dow Jones Industrial Average rose 0.97 percent, to 31,802, the S&P 500 lost 0.54 percent, to 3,821 and the Nasdaq Composite dropped 2.41 percent, to 12,609.

A slide in the big tech stocks that have driven the rally in equities since pandemic-induced lows of last March continued, with Apple, Nvidia, Tesla and Alphabet’s Google leading declining shares on Nasdaq.

Tech stocks are particularly sensitive to rising yields because their value rests heavily on earnings in the future, which are discounted more deeply when bond returns go up.

The divergence between the tech stocks and non-tech stocks explains trading today, said Joe Saluzzi, partner and co-founder of Themis Trading in Chatham, New Jersey.

"The stimulus package will be certainly helping the bigger cap names," Saluzzi said, referring to non-tech stocks. "The get-out and non-stay at home stocks are doing better now," he said.

Walt Disney jumped about 6 percent as California health officials set new rules that would allow Disneyland and other theme parks, stadiums and outdoor entertainment venues to reopen as early as April 1. (Reuters)