The major averages closed mixed once again with the Dow Jones Industrial Average jumping 0.9% to an all-time high on Friday as rising reopening optimism continued to encourage the rotation into cyclical stocks. Meanwhile, surging bond yields rekindled valuation fears and took the comeback momentum out of tech names. The 30-stock benchmark rose 293 points. Bank stocks gained amid rising rates, while industrials continued their strength on the back of new stimulus. Goldman Sachs shares jumped 2.3%, and JPMorgan climbed 1.8%. Boeing popped 6%.
The S&P 500 lost 0.2%, falling from a closing high reached in the previous session. Tech and communication services were the two biggest losers among the 11 S&P 500 sectors. The Nasdaq Composite shed 0.9% as shares of Tesla fell more than 3%. Netflix and Facebook dropped 2%, while Apple, Amazon and Microsoft were all down at least 1%.
The 10-year Treasury yield jumped more than 0.1% to 1.64% Friday, hitting its highest level since February 2020. The benchmark rate started 2021 at around 0.92%.
The rapid rise in bond yields prompted investors to dump the Nasdaq names again after a brief rebound earlier this week. Sharp increases in interest rates can put outsized pressure on high-growth tech stocks as they reduce the relative value of future profits.
Ned Davis Research estimated that the Nasdaq 100, the tech heavy index which tracks the 100 largest non-financial companies in the Nasdaq Composite, would drop another 20% if the 10-year yield hits 2%.
Friday's sell-off pared the Nasdaq's weekly gain to about 2%. The S&P 500 is up 2% on the week, while the blue-chip Dow outperformed with a 3.7% rally this week as investors piled into names tied to an economic recovery. The Russell 2000 rose 0.6% to a record Friday.
The S&P 500 jumped 1% and hit a new closing high Thursday, surpassing its previous record from Feb. 16, as President Joe Biden's $1.9 trillion Covid-19 relief package became law.
Biden's much-anticipated relief bill will send direct payments of up to $1,400 to many Americans as soon as this weekend, and will also put nearly $20 billion into Covid-19 vaccinations and $350 billion into state, local and tribal government relief.
Biden announced Thursday evening that he would direct states to make all adults eligible for the vaccine by May 1 in his first primetime address as president. Biden also set a goal for Americans to be able to gather in person with their friends and loved ones in small groups to celebrate the Fourth of July.
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