Technology rebound leads stocks higher in early US trading

A surge in big technology stocks was pulling the stock market sharply higher on Tuesday,

A surge in big technology stocks was pulling the stock market sharply higher on Tuesday, as a fall in bond yields was helping beaten-down technology companies recover.

The surge comes a day after the Nasdaq closed 10% below its February peak, what is known as a “correction” on Wall Street.

The S&P 500 was up 1.4% as of 9:55 a.m. Eastern. The technology-heavy Nasdaq was up 2.9%, led by gains in Apple, Amazon, Facebook and Cisco. The Dow Jones Industrial Average, which is weighted less toward tech than the other two indexes, was up a more modest 0.5%.

Investors were relieved to see that long-term interest rates were falling in the bond market. The yield on the 10-year Treasury note dropped to 1.53% after trading above 1.60% a day earlier. Higher bond yields tend to pull money away from high-priced stocks like technology companies, which have been soaring through the pandemic.

Yields have been climbing with rising expectations for growth and the inflation that could follow. Higher yields put downward pressure on stocks generally, in part because they can steer away dollars that might have gone into 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.

Striking the “correction” level for the Nasdaq is also important for many investors and traders who use technical indicators to decide when to buy or sell stocks. A correction is typically seen as a healthy moment for any market, giving investors a chance to pause and reallocate their investments without the volatility and stress that a bear market typically can bring.

Investors have been betting that $1.9 trillion in coming 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 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. It’s a victory for President Joe Biden and his Democratic allies, and final congressional approval is expected this week.

Oil prices were moving modestly lower as well, continuing a two-day slide. U.S. crude oil fell 1.1% to $64.35 a barrel.

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