After a brutal few weeks, a tech stocks rebound happened yesterday much to the delight of investors. The Nasdaq Composite Technology stocks experienced their best session in more than four months. Buyers experienced a field day bargain hunting yesterday, pushing recently downbeat tech stocks by double digits. Roku, Tesla, and Square were among the top gainers. Heavy hitters such as Apple, Facebook, and Amazon also experienced an uptick.
Tech Stocks Rebound
The Nasdaq rose 464.66 points, or 3.7%, to 13073.82. This represents its largest one-day percentage gain since November 4, 2020. The rally reduced the index’s decline from its February 12 high to 7.2%.
Meanwhile, the other indices have it better as well. The S&P 500 added 54.09 points, or 1.4%, to go up 3875.44. Also, the Dow Jones Industrial Average added 30.30 points, or 0.1%, to 31832.74. This is after rising more than 300 points earlier in the session. Currently, the blue-chip index is off just 0.4% away from its previous record high set last month.
Treasury Yields Fall
Meanwhile, a government bonds sell-off paused for the first time in its last five sessions. 10-Year Treasury yields closed at 1.545% on Tuesday, much lower than the previous day’s close at $1.594. The relative stabilization of the bond market pushed tech shares to recoup their earlier losses.
Money managers expect a continuation of the pandemic’s usual activities. Many companies expect to benefit from increased online shopping and home entertainment services such as video games and streaming services. Even as the pandemic slowly clears up, it will take a while for things to return to the way they were before the pandemic. That is if things return to before at all.
Buy The Dip Mentality
Daniel Morris, the chief market strategist at BNP Paribas Asset Management, sees a new mentality forming. “It is this buy-the-dip mentality, It’s not like we’ve changed our long-term view on tech. Everyone expects it to do well—it was just really expensive,” he said.
Earlier, this mentality was noticeably absent during the last few weeks. Recently, investors roasted from growth stocks to value shares. These are companies in a better position to benefit from an economic recovery. However, opportunistic buying is a prominent feature in previous stock-market pullbacks. In fact, this is what happened in March of last year when the pandemic shut down the economy.
On Tuesday, the buying frenzy went into the full blast and helped tech companies cut their recent losses to more manageable levels. In addition, the continued buzz about a forthcoming COVID-19 $1.9 trillion bills is putting investors in a better mood. The House will vote on the revised bill Wednesday and all signs point to the bill getting passed.
However, some investors believe the big gains won’t lead to ending the current volatility. “There will be heightened volatility as long as the path of inflation remains as uncertain as it is,” said Jase Auby. Auby is the chief investment officer for the Teacher Retirement System of Texas. He said the pension fund’s stock allocation currently tilts toward value stocks. These belong to companies more likely to benefit from economic stimulus. For now, investors appeared to be putting those concerns on hold.
Bond Moves Play Out
Also, investors see the bond markets cooling off. Appetite for US government debt increases if the yield rates rise up. For now, the 10-year Treasury yield remains low at 0.915% near the start of the year. “We think a big part of the bond-yield move has played out. At this level of yields, we do expect additional buyers to come in. That tends to stabilize the yield level,” said Hani Redha of PineBridge Investments.
Are you buying tech stocks at the current dip? Or, do you think growth stocks are played out? Let us know what you think about the current state of the markets. Share your opinions in the comments section below.
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