By William Watts and Sunny Oh
U.S. stocks ended lower on Tuesday, led by technology stocks, a day after major indexes booked their best daily gains in more than three months and global bond yields halted their unsettling rise.
How are stock benchmarks performing?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.29% fell 143.99 points, or 0.5%, to 31,391.52.
The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.22% slid 31.53 points, or 0.8%, to 3,870.29.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.72% dropped 230.04 points, or 1.7%, to 13,358.79.
On Monday , the Dow booked its best daily gain since Nov. 9, the Nasdaq Composite Index registered its best day since Nov. 4, while the S&P 500 finished the session with its best daily gain since June 5.
What’s driving the market?
Equity markets came under pressure a day after upbeat reports on the strength of the economy and a slight pullback in sovereign bond yields provided some support for risky assets as the outlook for the COVID-19 pandemic improves.
But investors remain jittery after a sudden rise in Treasury yields last week threatened to tighten financial conditions for an economy still recovering from the pandemic and called stock market valuations into question.
Analysts said the bond-market selloff last week reflected expectations that the distribution of vaccines from the likes of Johnson & Johnson /zigman2/quotes/201724570/composite JNJ +1.05% and other drugmakers, as well as a likely imminent infusion of fresh government spending, would drive up inflation and bond yields, as well as economic growth, in the second half of 2021.
“Markets are a bit on edge. Last week’s interest rates moved too fast for comfort. But it’s confirmation of the reflationary environment taking hold. That’s what the Fed and the market should be wanting,” said Karyn Cavanaugh, chief investment officer at Carolinas Wealth Management, in an interview.
Investors saw more guidance from Federal Reserve speakers. Fed Gov. Lael Brainard said on Tuesday the U.S. economy is likely to experience a “burst” of short-lived inflation rather than a durable shift in price levels.
Brainard also said some of the interest-rate swings last week caught her eye, and that she would be concerned if it led to a tightening of financial conditions.
Over the past few sessions, investors have fretted that the Fed’s lack of reaction to higher bond yields could fuel further selling in the Treasurys market.
Meanwhile, concerns about bubbles and overvalued parts of the stockmarket in the U.S. and China were a source of concern for Chinese regulators . Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission and Party secretary of the central bank warned at a briefing in Beijing that stock values were disconnected with economic fundamentals in the U.S. and Europe, reported Bloomberg News and Reuters .