Stocks give up an early gain, turn lower; bond yields slip

Pedestrians pass the New York Stock Exchange Tuesday, Feb. 16, 2021, in New York. Stocks are off to a mostly higher start, Friday, Feb. 26, as technology companies find their footing after a big sell-off a day earlier. (AP Photo/Frank Franklin II, File)

Stocks gave up an early gain and turned mostly lower in morning trading on Wall Street Friday. Banks and energy companies led the way lower, while technology companies, which had been beaten down in recent days, started to recover.

Investors continued to watch the bond market, where Treasury yields were declining, as well as Washington, where Congress is expected to vote on President Joe Biden's stimulus package.

The S&P 500 index was down 0.9% as of 10:30 a.m. Eastern. The Dow Jones Industrial Average was down 1.4%. The technology-heavy Nasdaq was down 0.6%.

A sell-off on Wall Street Thursday picked up speed when the yield on the 10-year U.S. Treasury note rose above 1.5%, a level not seen in more than a year and far above the 0.92% it was trading at only two months ago. That move raised the alarm that yields, and the interest rates they influence, will move higher from here.

Bond yields were easing off of their multi-week climb. The yield on the 10-year U.S. Treasury note fell to 1.49%.

The recent rise in bond yields reflects growing confidence that the economy is on the path to recovery, but also expectations that inflation is headed higher, which might prompt central banks eventually to raise interest rates to cool price increases. Rising yields can make stocks look less attractive relative to bonds, which is why every tick up in yields has corresponded with a tick down in stock prices.

Technology stocks have been impacted more than the broader market by the rise in bond yields. Technology stocks tend to trade at higher valuations than the overall market. Investors are also betting that with vaccinations, the coronavirus pandemic may be coming to an end which would pivot consumer behavior away from online-only shopping.

In Washington, Democrats in Congress are preparing to move forward with President Biden's $1.9 trillion stimulus package, with a vote in the House of Representatives planned for Friday. The Senate could vote on the package as early as next week.

The stimulus bill would include yet another round of one-time payments to most Americans, including an expansion of other refundable tax credits like the child tax credit, as well as additional aid to state and local governments to combat the pandemic.