Skip to Content

Tesla and tech stocks surge, giving Wall Street whiplash

Investors can’t seem to make up their minds about whether to buy or sell tech stocks.

A day after dragging the Nasdaq Composite into correction territory, tech stocks were on a massive rebound rally — the latest surge in the sector’s volatile start to the year.

The tech-heavy Nasdaq closed 3.7% higher on Tuesday, marking its best day since November. Tesla shares were particularly hot, soaring more than 19% on improved demand from China.

A near-4% jump is huge by any standard, but it’s particularly stunning after Monday’s selloff that put the index in correction territory, defined as a drop of at least 10% from its peak. The Nasdaq hit a record high on February 12, not even a month ago.

So what happened? Perhaps it’s just a run on buying the dip that formed recently when tech stocks softened.

The sectors been getting whipsawed as investors try to read the tea leaves and prepare for the next driver of market momentum.

Investors worried that the recovering economy would mean stocks that performed well during the lockdown of 2020 had run their course. Strategists began talking about rotating their portfolios away from tech to include more cyclical stocks again.

“The cyclical rotation has been running strong for months and today is an overdue buying the dip for technology stocks,” said Edward Moya, senior analyst at Oanda, in a note to clients.

The expected economic recovery has spurred a jump in Treasury bond yields lately, which has in turn weighed on the market. But on Tuesday, this dynamic reversed in favor of stocks.

The 10-year US Treasury yield was down 0.06% at 1.54% around the time of the stock market close. Bond yields and prices move in opposition to each other.

Investors expect that a full reopening of the economy will cause inflation to pick up and force the Federal Reserve’s hand in raising interest rates sooner than expected. That would be bad for stocks because higher interest rates would make it more expensive for companies to borrow.

Tech isn’t the only sector doing well Tuesday. Aside from strong performances in energy and consumer shares, Tesla stock is super hot once again, after data revealed that Chinese demand for its vehicles improved in February.

Tesla is set to break a five-day losing streak that put it further into bear market territory after an electric start to the year.

“Considering the Lunar New Year in China which took up a portion of February, we would characterize these February results as quite impressive and ahead of Street expectations,” wrote Wedbush Securities analyst Dan Ives.

Tesla closed up 19.6%, the stock’s best day since February 2020.

The S&P 500, which Tesla joined in December, finished 1.4% higher. The Dow ended up a modest 0.1%, or 30 points.

Article Topic Follows: Money

Jump to comments ↓

CNN

BE PART OF THE CONVERSATION

KRDO NewsChannel 13 is committed to providing a forum for civil and constructive conversation.

Please keep your comments respectful and relevant. You can review our Community Guidelines by clicking here

If you would like to share a story idea, please submit it here.

Skip to content