Tech leads stocks higher as bond yields ease; banks fall

Stocks rose on Wall Street in afternoon trading Monday as a modest drop in bond yields helped the market recoup some of its losses after a pullback last week.

Technology companies led the way higher, while banks were among the biggest decliners.

The S&P 500 index was up 0.9% as of 2:21 p.m. Eastern. The Dow Jones Industrial Average gained 124 points, or 0.4%, to 32,753 and the technology-heavy Nasdaq rose 1.7%. The Russell 2000 index of smaller-company stocks fell 0.5%.

Stocks ended last week in the red as a rise in bond yields caused selling in many parts of the market. Bond yields have been moving steadily higher all year as investors have bet that the U.S. economy is poised to strongly recover later this year as vaccinations and trillions of dollars of government stimulus take effect.

But a rise in bond yields causes parts of the stock market to appear more expensive than others, the dominant example being technology stocks. Big technology stocks rose sharply last year, and their high valuations make them a prime target for selling when investors can find safer places to park their money.

The prospect of higher interest rates as bond yields rise has some investors concerned that economic growth could slow. There are also concerns that the rise in bond yields could be a harbinger of inflation.

“There will be a pickup in inflation, no doubt about that, as the recovery progresses,” said David Lefkowitz, head of Americas equities at UBS Global Wealth Management. “As long as rates are rising for the right reasons, that's fine for stocks.”

The yield on the 10-year Treasury note fell to 1.69% after trading as high as 1.74% last week. Amazon rose 1.5% and Apple gained 3%, while Microsoft rose 2.7%.

Bank stocks fell. Lower yields potentially mean banks will only be able to charger lower interest rates to borrowers. The KBW Bank Index of the 24 largest banks was down more than 2%.

The U.S.-traded shares of British drug company AstraZeneca were up 3.5% after British and U.S. health officials said the company's COVID-19 vaccine was safe and earlier reports of blood clots were outweighed by the health benefits of the vaccine.

Kansas City Southern was up 12.1% for the biggest gain in the S&P 500 after a Canadian railroad announced it would buy the company for $25 billion.

Apollo Global Management rose 4.3% after the private equity company announced that its longtime chairman Leon Black would be retiring. Black's reputation had been damaged in the last couple of years by his association with disgraced financier Jeffrey Epstein.

The Turkish lira nosedived 7.8% after the country’s president, Recep Tayyip Erdogan, fired his third central bank head in less than two years over the weekend. The latest abrupt change raised concerns about a possible return to the unconventional monetary policy favored by the Turkish president.