Sell-off in technology sector weighs on stock indexes

Major U.S. stock indexes closed mostly lower Monday as another rise in bond yields helped set off more heavy selling in technology companies.

The S&P 500 fell 0.54% after having been up 1% earlier in the day. Drops by Apple, Google’s parent company and other major technology stocks helped drag the S&P 500 into the red, even though more stocks rose than fell in the benchmark index.

The selling, which accelerated toward the end of the day, left the tech-heavy Nasdaq composite down 10.5% from the record high it reached Feb. 12. A drop of 10% or more from a recent peak is known on Wall Street as a “correction.”

The S&P 500 fell 20.59 points, to 3,821.35. The Dow Jones Industrial Average rose 306.14 points, or 1%, to 31,802.44. The index briefly climbed more than 650 points. The Nasdaq lost 310.99 points, or 2.4%, to 12,609.16.

Smaller-company stocks, which have led the market higher this year, notched more gains. The Russell 2000 index added 10.77 points, or 0.5%, to 2,202.98.

Bond yields rose broadly. The yield on the 10-year Treasury note climbed to 1.6% from 1.55% late Friday.

Yields have been marching higher amid rising expectations for the economy’s growth and for the inflation that could accompany it. Higher yields generally put downward pressure on stocks, in part because they can steer dollars that had been headed for the stock market into bonds instead. That makes investors less willing to pay such high prices for stocks, especially those that look the most expensive, such as technology stocks.

Investors can expect more market volatility as long as bond yields keep rising, said Sylvia Jablonski, chief investment officer at Defiance Exchange-Traded Funds. “I do think it’s something that’s going to be temporary,” Jablonski said.

Still, she said, the pullback in technology stocks offers an attractive entry point for investors to snap up shares in some big names, such as Apple and Amazon, at a better price.

“There are some solid buy-on-the-dip opportunities here,” Jablonski said.

Financial stocks had some of the best gains. Wells Fargo rose 3.3%, and Citigroup gained 2.8%.

Trading has been choppy in recent weeks as investors fret over the sudden spike in long-term interest rates in the bond market. The S&P 500 is coming off its first weekly gain in three weeks.

Technology companies have been heading lower as investors start to doubt whether the huge gains they made during the pandemic months can continue if inflation surges. Apple fell 4.2%, Google’s parent Alphabet dropped 4.3%, and Facebook slid 3.4%.

The latest move in bond yields fanned those concerns Monday.

“Interest rates reflect a real economic recovery, and they’re not going back down anytime soon,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “Right now, the market is struggling with that.”

Investors have been betting that trillions of dollars in government stimulus will help lift the economy out of its coronavirus-induced malaise. There are also investors who are betting that stimulus and an improving economy will result in some amount of inflation down the road.

The U.S. economic aid package passed narrowly by the Senate on Saturday provides direct payments of up to $1,400 for most Americans and extends emergency unemployment benefits. Final congressional approval is expected this week.

“That eliminates a major short-term risk and also puts a lot of money into the economy in the short term,” McMillan said.