Stock Gains Faded, but Tech Bounced on Lower Yields

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Most stocks couldn’t hold on to gains Tuesday after the major indexes tried to rebound from their worst 3-day stretch since 2020. Bond yields, meanwhile, ticked lower, providing a boost to technology stocks.

The

Dow Jones Industrial Average
rose fell 85 points, or 0.3%, while the

S&P 500
gained 0.3%. The technology-heavy

Nasdaq Composite
rose 1%.

While tech stocks begun to rebound, the average stock didn’t do so well. The

Invesco S&P 500 Equal Weight
Exchange-Traded Fund (RSP), which weights each stock in the index equally and therefore shows the movement of the average stock, fell 0.3% after having been up earlier in the day.

“The sentiment still is not there that people are buying into this rally,” said Dave Wagner, portfolio manager and analyst at Aptus Capital Advisors. “That makes sense to me given that today is pretty quiet.” 

Indeed, there are few meaningful catalysts Tuesday—like economic data or Federal Reserve announcements—that could move stocks higher. The general economic uncertainty that markets just can’t shake is taking over, compelling market participants to sell stocks when they pop too much. 

All three major indexes have sold off sharply for the past three days, landing them at new closing lows for the year. The S&P 500 has fallen 16% so far this year through Monday’s close, as the Federal Reserve lifts interest rates and reduces its bondholdings to combat high inflation. Those are moves that will likely slow down economic growth and have already caused a selloff in bonds, lifting their yields. Lockdowns in China are also restricting companies around the globe from accessing supplies, yet another factor bringing costs higher, a threat to profit margins. 

The good news: Technology stocks were getting a slight boost from lower bond yields. The 10-year Treasury yield dropped to 2.99, down from a pandemic-era closing high of 3.13% Friday. That is still up from 1.51% at the end of 2021. The problem is that higher long-dated bond yields make future profits less valuable, thus lowering valuations for high-growth companies that are expecting a bulk of their profits to come many years in the future. So the stock market was encouraged to see the 10-year yield shows signs—for the moment—that it will stop surging. 

“The retreat in the 10-year yield is a welcome sign,” wrote Lindsey Bell, chief markets and money strategist at Ally.

For the broader market—tech included—stocks are nowhere near out of the woods. Recently, the stock market’s declines have landed it at new lows for the year, while its mini-rallies have landed it at lower peaks—before the next selloff occurs. That signifies that market participants have become less willing to buy stocks at higher levels as their confidence in the economy and the market outlook has waned.

“Although [market] pullbacks are common, investors should be more cautious now as the Federal Reserve embarks on what will be a lengthy effort to reduce stimulus from the economy,” wrote Richard Saperstein, chief investment officer at Treasury Partners. 

Overseas, the pan-European

Stoxx 600
rose 0.7%, but Hong Kong’s

Hang Seng Index
played catch-up to Wall Street’s Monday malaise, losing 1.8%.

The digital asset space has fared well. Bitcoin, the largest cryptocurrency, was up near 4.1% over the past 24 hours to above $31,000, having traded around $36,000 last Friday before beginning to slide over the weekend. 

In the depths of Tuesday trading, Bitcoin broke below the key $30,000 barrier, a level it hasn’t consistently traded below since late 2020. “Bitcoin is a great barometer for risk now and we see its decline as evidence of significant deleveraging,” said Neil Wilson, an analyst at broker Markets.com.

Here are six stocks on the move Tuesday:

Upstart

(ticker: UPST) stock fell 56% after the artificial-intelligence lending company slashed its full-year revenue outlook, noting the possibility of a recession.

Peloton

(PTON) stock dropped 7% after the company reported a loss of $2.27 a share, wider than estimates of an 83 cent loss, on sales of $964.3 million, below expectations for $970 million. 

Novavax

(NVAX) gained 0.4% after the vaccine maker’s earnings came in below Wall Street’s expectations despite reporting its first profitable quarter.

Plug Power

(PLUG) slipped 5.5%, after the fuel-cell company’s quarterly earnings revealed revenue below Wall Street’s estimates and a wider-than-expected loss.

After notching dramatic declines on Monday, stocks sensitive to the price of Bitcoin were falling again.

Coinbase Global

(COIN), which reports earnings after the bell, fell 6.7% after plunging 20% in the previous session, with digital-payments group

Block

(SQ) down 1.8% after a 13% fall on Monday.

Write to Jack Denton at jack.denton@dowjones.com and Jacob Sonenshine at jacob.sonenshine@barrons.com