Stocks Finish Higher; Nasdaq Up 3.7% as Dip Buyers Turn to Tech

Stocks end higher. The Nasdaq rebounds from Monday's selloff as dip buyers turned to tech stocks.
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Stocks finished higher Tuesday and the tech-heavy Nasdaq rebounded as investors turned again to riskier high-growth equities.

The Dow Jones Industrial Average, which touched an intraday record, lost some steam at the close but still finished up 30 points, or 0.1%, to 31,832. At one point during the day the blue-chip index was up 1.1%.

The S&P 500 gained 1.42%. The Nasdaq soared 3.69%, moving back into positive territory for the year.

Boeing  (BA) - Get Report rose 3% after the Chicago plane maker booked more new orders than cancellations for the first time in more than a year.

Beaten-down tech giants such as Apple  (AAPL) - Get Report and Tesla  (TSLA) - Get Report advanced on Tuesday.

Tesla halted a five-day slide, finishing up 20%. Cathie Wood’s ARK Innovation ETF  (ARKK) - Get Report, which has Tesla as its largest holding, jumped 10%.

Bonds rallied Tuesday, pushing yields lower, after the first of several bond auctions this week -- $120 billion of government debt will be sold -- kicked off.

The 10-year Treasury rate traded at 1.545% on Tuesday, after climbing to 1.6% in the previous session.

Rising bond yields, which have dominated market attention the past few weeks, have been hitting tech shares the hardest since the high-growth stocks can be more vulnerable to inflation pressures.

The Nasdaq dropped 2.41% on Monday and entered correction territory. Investors rotated out of high-flying tech names and into stocks that will benefit the most from a reopening U.S. economy following Senate passage of President Joe Biden's $1.9 trillion stimulus package. 

"Corrections, which are a drop of 10% from a high, create natural inflection points for traders. Many create automatic buy orders at these levels, so it’s no surprise to see the Nasdaq rise (Tuesday), and the fundamentals support continued bullishness," said Chris Larkin, a managing director at E-Trade.

Investors have been betting on a stronger-than-expected post-pandemic turnaround fueled by Biden's COVID relief bill, which likely will clear Congress this week. But investors fear that strong recovery also will boost inflation.

Treasury Secretary Janet Yellen, however, said inflation fears were overblown. 

“I really don’t think that’s going to happen,” Yellen told MSNBC in an interview. Inflation before the coronavirus pandemic “was too low rather than too high,” she said.

“This is a bill that will really provide Americans the relief they need to get to the other side of the pandemic, and we expect the resources here to really fuel a very strong economic recovery,” Yellen said.

She added that she expects Biden's relief package will enable the U.S. to return to prepandemic “full employment” levels by 2021.