Technology companies lead stocks higher

Technology companies led stocks higher on Wall Street Monday, reversing some of the market’s losses from last week, as investors welcomed some easing in long-term bond yields.

The S&P 500 index rose 0.7%, as gains in technology, communication and other stocks outweighed a pullback in financial companies. The rally in tech stocks pushed the Nasdaq composite 1.2% higher.

A steady rise in bond yields over the past month has been luring investors away from high-flying tech stocks, but traders have also been quick to snap up tech stocks on days when bond yields decline or only rise slightly.

The yield on the 10-year Treasury note fell to 1.69% after trading as high as 1.74% last week. Amazon, Apple, and Microsoft all made solid gains.

The prospect of higher interest rates as bond yields rise has some investors concerned that economic growth could slow. There are also concerns that the rise in bond yields could be a harbinger of inflation.

“There will be a pickup in inflation, no doubt about that, as the recovery progresses,” said David Lefkowitz,

head of Americas equities at UBS Global Wealth Management. “As long as rates are rising for the right reasons, that’s fine for stocks.”

The S&P 500 added 27.49 points to 3,940.59. The Dow Jones Industrial Average rose 103.23 points, or 0.3%, to 32,731.20. The Nasdaq climbed 162.31 points to 13,377.54. The Russell 2000 index of smaller companies slid 20.70 points, or 0.9%, to 2,266.84.

Stocks ended last week in the red as a rise in bond yields caused selling in many parts of the market. Bond yields have been moving steadily higher all year as investors have bet that the U.S. economy is poised to strongly recover later this year as vaccinations and trillions of dollars of government stimulus take effect.

But a rise in bond yields causes parts of the stock market to appear more expensive than others, the dominant example being technology stocks. Big technology stocks rose sharply last year, and their high valuations make them a prime target for selling when investors can find safer places to park their money.

Traders seized on the pullback in bond yields to snap up shares in some of the Big Tech companies Monday. Amazon rose 1.2% and Apple gained 2.8%, while Microsoft rose 2.4%.