Stocks jumped on Tuesday and technology stocks resurged after another session of deep losses. The Dow extended Monday's gains, but trailed the S&P 500 and Nasdaq.
The Nasdaq gained 3.7% for its best day since November. The move marked a stark reversal after the index sank into a correction by the close of Monday's session, plunging a total of more than 10% from a recent record closing high. Shares of Tesla (TSLA) jumped nearly 20% paring much of its year-to-date loss after dropping over the past couple weeks. Apple (AAPL) shares also rebounded since hitting the lowest level since November earlier this week. The Dow, meanwhile, added to gains after rallying to an all-time intraday high on Monday.
The sharp contrast between the performance of the Dow and Nasdaq in recent sessions has underscored investors' increasing tilt away from technology stocks in favor of value and cyclical stocks with earnings closely tied to a strong economic recovery. The U.S. House of Representatives is set to take up the $1.9 trillion stimulus package the Senate advanced over the weekend, putting the legislation on track for potential passage this week and teeing up the economy for another massive infusion of stimulus. These prospects have also pushed bond yields higher, with the yield on the 10-year Treasury note topping 1.61% on Monday, for a jump of about 50 basis points from levels just a month ago.
These factors have all worked to make the growth and tech stocks less appealing to investors, especially following many of their breakneck run-ups last year. Shares of Zoom Video Communications (ZM) – a paragon of the "work from home" trade of 2020 – have fallen 8% for the year-to-date through Monday's close, pulling back after a nearly 400% surge last year. Shares of other technology companies and businesses conducive to social distancing have endured similar swoons, albeit while steadying at least temporarily during Tuesday's session.
"This is a trend that tends to happen as we get out of a recession: You tend to see stocks move towards cyclicals. So things like value companies or small caps, things like energy, tend to do really well when you’re coming out of a recession. And what happened last year is, those tech companies were really doing so well that their prices were getting extremely high,” Courtney Dominguez, Payne Capital Management senior wealth advisor, told Yahoo Finance on Monday.
“I don’t think these companies are going away. I think a lot of these are going to be things that we continue to have in our workplaces going forward," she added. "But the question is, are these companies so expensive, is all the optimism already priced in? And that’s different than these companies continuing to being a main forefront of how we work going forward."
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