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US STOCKS-Nasdaq hits correction, Dow advances as stimulus bill nears finish line

Herbert Lash and Karen Pierog
·4 min read
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* Disney gains as California allows theme parks to reopen

* Bank stocks advance as yields rise on stimulus bill

* GameStop jumps after tapping Ryan Cohen to lead transition (Adds details on Nasdaq correction, Dow hits intra-day record)

By Herbert Lash and Karen Pierog

March 8 (Reuters) - Technology-related shares sold off on Monday in a big downturn that pushed the Nasdaq into a correction and offset stocks that rose on hopes the $1.9 trillion COVID-19 relief bill will spur the U.S. economic recovery.

The Dow hit a record intra-day high but the big tech stocks that have led Wall Street to scale successive peaks over the past year fell, with the Nasdaq closing down 2.41%. The Nasdaq is now down 10.6% from its Feb. 12 record close, or more than a 10% slide the market considers a correction.

Shares related to finance, restaurants and travel rose on expectations those sectors will do well when the economy reopens, but they were unable to offset the weight of the bigger tech shares that dominate the U.S. stock market.

After the stimulus bill won U.S. Senate approval on Saturday, President Joe Biden said he hoped for quick passage by the Democrat-controlled House of Representatives so he could sign it and send $1,400 direct payments to Americans.

But prospects of more government spending and a growing economy have stoked fears of an inflation spike, sending the benchmark 10-year Treasury yield to near one-year highs and weighing on technology shares that rely on cheap funding for growth.

U.S. Treasury Secretary Janet Yellen said on Monday the package would fuel a "very strong" U.S. recovery and she did not expect the economy to run too hot because of the increased spending.

As bonds yields have moved up, concerns about equity valuations for growth-oriented stocks and tech stocks specifically have weighed on the Nasdaq relentlessly the last three weeks, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

Stocks that will do well once people start traveling and eating out again have been leading the charge higher, James said.

"People have been reallocating assets into those sectors. It's been coming out of growth-tech to fund those purchases," he said.

The Dow Jones Industrial Average rose 306.14 points, or 0.97%, to 31,802.44, the S&P 500 lost 20.59 points, or 0.54%, to 3,821.35 and the Nasdaq Composite dropped 310.99 points, or 2.41%, to 12,609.16.

Volume on U.S. exchanges was 14.03 billion shares.

The financial sector was the biggest boost in the S&P 500, hitting a record as higher market rates and a steeper yield curve helped banks. Industrials were right behind, also reaching a record high, while the materials sector neared an all-time peak. The technology sector was deepest in the red.

The recent slide in the big tech stocks continued, with Apple Inc, Nvidia Corp, Tesla Inc and Alphabet Inc’s Google leading declining shares on Nasdaq.

Tech stocks are particularly sensitive to rising yields because their value rests heavily on earnings in the future, which are discounted more deeply when bond returns go up.

The divergence between the tech stocks and non-tech stocks explains trading today, said Joe Saluzzi, partner and co-founder of Themis Trading in Chatham, New Jersey.

"The stimulus package will be certainly helping the bigger cap names," Saluzzi said, referring to non-tech stocks. "The get-out and non-stay at home stocks are doing better now," he said.

Banks added about 2% as the yield on the benchmark 10-year note stood near a 13-month high, while airlines jumped about 5%.

Walt Disney Co jumped about 6% as California health officials set new rules that would allow Disneyland and other theme parks, stadiums and outdoor entertainment venues to reopen as early as April 1.

GameStop Corp surged about 42% after the company said it had tapped shareholder Ryan Cohen to lead a transition to an e-commerce business. Advancing issues outnumbered declining ones on the NYSE by a 1.39-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored decliners.

The S&P 500 posted 124 new 52-week highs and no new lows; the Nasdaq Composite recorded 405 new highs and 28 new lows.

(Reporting by Herbert Lash in New York, Karen Pierog in Chicago and Medha Singh and Shashank Nayar in Bengaluru; Editing by Shounak Dasgupta and Lisa Shumaker)