S&P 500 Ekes Out Gain After Cutting Losses as Tech Eases Off Lows

© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 eked out a gain Tuesday, as cyclical sectors rallied and tech eased off session lows on dip-buying activity, though rising U.S. Treasury yields weighed on sentiment on the sector.   

The S&P 500 rose 0.17%, the Dow Jones Industrial Average gained 0.55%, or 194 points, the Nasdaq, which had fallen more than 1% during the day, closed down about 0.50%.

Tech and communications services – growth sectors of the market that tend to include stocks with higher valuation – fell out of favor as rising U.S. Treasury yields weighed on sentiment.

The selloff in tech has been driven by the “re-steepening in the yield curve as the spread between the 2-year and the 10-year Treasury yields moved back to 105 basis points in a relatively short order,” Mark Luschini, chief investment officer at Janney Montgomery Scott, told Investing.com in an interview on Tuesday.

Crowdstrike (NASDAQ:CRWD), DocuSign (NASDAQ:DOCU), Peloton Interactive (NASDAQ:PTON), Zoom Video Communications (NASDAQ:ZM), were some of the hardest hit growth names, with the latter also pressured by concerns about future growth.

Zoom Video Communications (NASDAQ:ZM) fell more than 14% after warning of a slowdown in revenue growth as the pandemic-fueled boost to user growth is expected to slow as employees return to the office.

“While we're positive on Zoom's strategic initiatives and investments in key growth areas, we find it tougher to like a stock with more sharply decelerating growth and incremental pressure on profitability,” Deutsche Bank said in a note as it slashed its price target on the Zoom to $280 from $350.

Big tech ended mixed, with Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) higher, while Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB), and Google-parent Alphabet (NASDAQ:GOOGL) ending lower. Despite the rise in yields, dip-buying in big tech is expected to continue.

“[W]hen somewhat frothy expectations build valuations up to the point where names that are among the leadership in tech are increasingly vulnerable to a pullback in their share price, [investors] should use those opportunities to add to positions if they're underweight or have established positions,” Luschini added.

Consumer discretionary also weighed on the broader market, paced by a 12% slump in Best Buy (NYSE:BBY) after the electronics retailer’s weaker-than-expected holiday comparable sales offset third-quarter results that beat on both the top and bottom lines.

Cyclical concerns of the market including financials, energy and industrials racked gains amid a rotation from value to growth.

Energy jumped more than 3% as oil prices rallied despite President Joe Biden saying Tuesday the U.S. will release 50 million barrels of oil from its Strategic Petroleum Reserve in tandem with other major oil consuming countries to curb rising energy prices.

“It will take time, but before long, you should see the price of gas fall where you fill up your tank,” Biden said on Tuesday.