By William Watts and Sunny Oh
Stock-market benchmarks ended mostly lower Monday, while the Dow Jones Industrials benchmark eked out modest gains, amid worries that rising bond yields could render equities too expensive.
What did major indexes do?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.89% rose 27.37 points, or 0.1%, to finish at 31,521.69, after briefly pushing above its 31,613.02 recording closing high on Feb. 17.
The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.77% shed 30.21 points, or 0.8%, to end at 3,876.50, booking five consecutive losing sessions, its longest such streak since Feb. 2020.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.51% slipped 341.41 points, or 2.5%, to close at 13,533.05, its biggest one-day loss since Jan. 27 when it slumped 2.6%.
Stocks put in a mixed performance last week, with the Dow /zigman2/quotes/210598065/realtime DJIA +0.89% rising 0.1%, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.77% booked a 0.7% fall and the tech-heavy Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.51% shed 1.7%.
What drove the market?
Long-term Treasury yields were on the climb again Monday, after last week notching their biggest rise in six weeks , sapping some enthusiasm of the stock-market bulls.
Higher “risk-free” yields can make it difficult to justify high valuations for equities, as it reduces the value of their future profits to investors. In a backdrop of rising rates and faster economic growth, technology companies with rapidly increasing earnings become less attractive to investors.
“Definitely, yields are the big thing,” Randy Frederick, vice president of trading and derivatives at Schwab Center for financial research, told MarketWatch, adding that investors also have been worried in recent weeks about the threat of “a big spike” in inflation.
Although, Frederick also thinks such fears are a little overblown, like the recent selloff tied to GameStop Corp. /zigman2/quotes/203755179/composite GME -6.99% , it pointed to how vulnerable stock benchmarks trading near all-time highs remain to a selloff, due to any unexpected news, or even severe weather, a year into the pandemic. “When you are a tad off record highs, inflation scares or a storm could cause a pullback,” he said.
Yields have been boosted by expectations that aggressive rounds of fiscal spending on top of extraordinary loose monetary policy by the Federal Reserve will stoke near-term inflationary pressures.
“The bond market appears to be pricing in strong economic data and GDP gains ahead, driven by increased consumer and business activity, and further pushed by more expected government stimulus,” said James Ragan, director of wealth management research at D.A. Davidson, in emailed comments.
Ragan, however, said the recent weakness in tech, while so-called cyclical stocks benefited, underscored more of a reflection of pent-up expectations for a reopening of the economy.
Congress is expected to pass another round of aid spending set to come in near President Joe Biden’s $1.9 trillion package. Investors also were penciling in the possibility of a large, long-term round of infrastructure spending.
The rollout of vaccines and falling COVID-19 case levels also continued to stoke hope for an acceleration in economic activity this year even as the number of U.S. deaths nears a milestone of 500,000 .