After the S&P 500 lost as much as 1.9% in the morning, the index posted an intraday loss of about 0.5% by midday, with the Dow Jones down roughly 0.9% and the Nasdaq hitting as high as a 0.3% gain.
The 10 year treasury yield fell to 0.63% from 0.64%, signifying investors are buying the safe bond. The yield had slipped to 0.61% in the morning, before climbing from there.
The S&P 500’s solid past two weeks has been accompanied by move into treasuries, which were above 0.75% recently. The S&P 500 is up 28% since the March 23 bear market low, as investors have looked past a rough 2020 earnings year and into a potential 2021 rebound.
But for now, the extent of lockdown eases remains a question mark, as does the continued deceleration of the spread of Coronavirus. The market has risen on optimism on these fronts, as well as Federal Reserve and fiscal stimulus.
"The reality, though, is that most of the country will remain on lockdown for some time, with a slow and potentially non-linear return to work plan,” said Lauren Goodwin, economist and multi-asset strategist at New York Life Investments. "As a result, we are wary of following market bulls into this rally. We are underweight U.S. equity and credit in our portfolios.”
But Monday, it was big tech to the rescue again. Amazon and Netflix, which combine for a market capitalization of about $1.4 trillion, rose as much as 2% and 4%, respectively. E-commerce, cloud services and streaming are services that may be unaffected by the virus and may even see a tailwind. Their earnings reports this week may be pivotal in investors’ willingness to keep buying those stocks.
Although the sell-off was broad across many sectors and the subsequent rebound has been broad as well, these stocks have outperformed of late. Netflix and Amazon are up 16% and 21% in the past two weeks, respectively. In that span, The S&P 500 is up 7%.
In the past month, even up until last week, some fund managers have been adding shares in big tech companies. Brian Price, head of investment management for Commonwealth Financial Network, told TheStreet fund managers he had spoken with were reluctant to add to positions in solid companies they favored in February, when the S&P 500’s all-time-high was home to rich earnings multiples. Recently, Price said, managers have been adding to those stocks, although he didn’t mention big tech.