Tech stocks lead Wall Street higher as Treasury yields slip

Stocks on Wall Street rose and US government bonds stabilised on Monday after the longest losing streak since 2018 for Treasuries.

The tech-heavy Nasdaq Composite gained 1.2 per cent by the market close in New York, rebounding from another turbulent week. The blue-chip S&P 500 ended 0.7 per cent higher.

Last week, both indices sold off sharply on Thursday as yields on the benchmark US 10-year note jumped past another milestone to briefly trade above 1.75 per cent. The yield-induced stock market volatility was particularly pronounced among big tech shares, which often have a low-rate environment heavily baked into their high valuations.

On Monday, US Treasuries pared back some of last week’s losses, with the yield on the 10-year note falling 0.04 percentage points to 1.68 per cent.

“It does seem axiomatic that the Nasdaq is inversely correlated with Treasury yields at this point,” said Bruce Monrad, a portfolio manager at Northeast Investors Trust. “That particular paradigm seems to be intact today.”

The calm start to the bond market’s trading week follows almost two months of rising yields and comes despite the US Federal Reserve announcing on Friday that it would not extend a loosening of bank capital requirements that had previously supported the market.

The Fed also reiterated last week its intention to keep stimulus flowing even in the event of a pick-up in inflation.

“The markets are digesting what the Fed said . . . The Treasury yield is elevated from where it has been in the past but it’s not the near-vertical climb that we have seen recently,” said Dean Cheeseman, portfolio manager at Janus Henderson.

In Europe, the region-wide Stoxx 600 closed up 0.2 per cent, while Frankfurt’s Xetra Dax and London’s FTSE 100 both climbed 0.3 per cent.

Europe’s rollout of Covid-19 vaccines hit a roadblock last week following wrangling among the continent’s leaders over the efficacy and availability of the Oxford/AstraZeneca jab. France recently imposed a four-week lockdown in Paris and Italy announced stricter curbs over Easter.

The rising cases in Europe have led to doubts over the viability of this summer’s holiday season, sending airline and other travel shares tumbling on Monday. A 5.4 per cent fall in budget airline easyJet helped drag the region’s travel and leisure stocks 0.7 per cent lower.

“The only way to get a handle on these more virulent strains is to do a lockdown and that has a knock-on effect on the economy,” said Cheeseman, adding that impediments to the rollout of Covid-19 vaccines would be particularly detrimental to tourism-dependent nations in southern Europe.

Turkish markets took a heavy blow on Monday after the country’s president fired its central bank governor. Per Hammarlund, chief emerging market strategist at Swedish bank SEB, said Turkey’s central bank “will be left with two choices: either pledge to use interest rates to stabilise markets, or to impose capital controls”.

Oil remained volatile after suffering from its biggest weekly fall since October on demand worries. Brent crude, the international benchmark, fell 0.3 per cent to $64.35 a barrel on Monday and West Texas Intermediate, the US benchmark, rose 0.2 per cent, to $61.55 a barrel. 

In Asia, China’s CSI 300 closed 1 per cent higher, South Korea’s Kospi lost 0.1 per cent and Hong Kong’s Hang Seng fell 0.4 per cent.