Stocks Pull Back After Big Rally, Dow Closes More Than 100 Points Lower

Wang Ying | Xinhua News Agency | Getty Images

U.S. stocks fell on Tuesday led by technology names, as the market gave back some of the strong gains from the previous session.

The S&P 500 slid 0.8% to 3,870.29 after the broad equity benchmark rallied more than 2% Monday for its best day since June. The Dow Jones Industrial Average fell 143.99 points, or 0.5%, to 31,391.52. The tech-heavy Nasdaq Composite lost 1.7% to 13,358.79 as Apple and Facebook fell about more than 2% each. Amazon and Microsoft both slipped 1%, while Tesla dropped 4.5%.

Tech and consumer discretionary were the two worst-performing sectors, falling more than 1% each. The slight gains in materials provided the broader market with some cushion.

"Markets may be trapped in a tug-of-war between what they expect to happen and pandemic-fueled insecurities which are compounded by other, harder to quantify, market impulse," Chris Hussey, a managing director at Goldman Sachs, said in a note. "On days like today, with no news and little macro to help investors keep the faith, we see 'what ifs' emerge — sideways trading, across all sectors, coupled by a pull back in rates."

The 10-year Treasury yield, a point of focus lately for equity investors, dipped below 1.41%. The benchmark rate appeared to be stabilizing this week after surging to a high of 1.6% last week, which eased some of the fears about higher borrowing costs and inflation.

Still, some investors believe it's inevitable that yields will trend higher this year amid an economic recovery and potentially more fiscal stimulus, which could shrink stock multiples.

"10yr yields aren't (yet) at the level where investors are wholesale selling out of stocks, but the recent increase has brought the PE expansion process to an end," Adam Crisafulli, founder of Vital Knowledge, said in a note.

Meanwhile, others think the jump in yields reflect improving economic growth and rising earnings forecasts and stocks should be able to absorb higher interest rates in the long run if it rises at a reasonable pace.

President Joe Biden said Tuesday that Merck will help make Johnson & Johnson's single shot Covid vaccine as the country tries to ramp up supply.

Economically sensitive cyclical sectors have outperformed the broader market this year amid optimism about vaccines and economic resurgence. Energy and financials have risen 28% and 12%, respectively, year to date.

U.S. equities began March on a strong note on Monday with the S&P 500 up 2.4%, the Dow Jones Industrial Average adding nearly 2% and the tech-heavy Nasdaq jumping just over 3% after shedding 4.9% last week. Both the Dow and the Nasdaq clinched their best trading day since November.

Shares of Target reversed early gains to close more than 4% lower despite the company reporting booming sales. The retailer declined to provide a forecast for 2021.

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