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Tech Shares Open Higher, Dow Slips

By Joe Wallace 

U.S. stocks ticked up Monday in a muted start to the week for major indexes.

The S&P 500 edged up 0.1%. The broad gauge of large-cap U.S. stocks snapped a two-week winning streak to slide less than 1% by the end of last week. The technology-focused Nasdaq Composite Index rose 0.5%, suggesting the tech sector will push higher to start the week.

The Dow Jones Industrial Average opened 0.2% lower.

Investors continued to train their attention on bond markets after a drop in the price of U.S. government debt last week. Ten-year Treasury notes recovered some ground Monday, sending yields down to 1.686%, from 1.729% Friday. Yields fall when bond prices rise.

Yields have climbed for seven consecutive weeks, denting segments of the stock market that had benefited from several years of low interest rates. Tech stocks, in particular, have suffered from the jump in longer-term government borrowing costs. Future earnings are worth less when bond yields rise.

Tech stocks including Apple edged up ahead of the bell. Electric-vehicle maker Tesla, another beneficiary of depressed bond yields, whose stock has faltered since early February, rose over 4%.

Railroad Kansas City Southern jumped 17% in premarket trading after agreeing to be bought by Canadian Pacific Railway in a transaction valued at about $25 billion.

The tech-dominated Nasdaq-100 skidded to its fourth week of losses in five on Friday. Many investors expect bond yields to keep rising as the economy picks up speed, posing a challenge to tech stocks that powered the broader market higher in 2020.

"There is more upside for U.S. bond yields than there is downside," said Edward Smith, head of asset allocation research at U.K. investment firm Rathbone Investment Management. Stocks "that delivered exceptional returns last year are probably not going do so well for now," Mr. Smith added.

That doesn't mean investors should abandon tech stocks, according to Mr. Smith. Shares of giants such as Apple, Microsoft and Facebook have proved resilient on some days when Treasury yields have shot up, he said. However, Mr. Smith added that money managers should be cautious about corners of the market with elevated valuations, such as shares in electric-vehicle companies.

The Federal Reserve has so far indicated that it isn't concerned about the rise in bond yields. Chairman Jerome Powell is scheduled to speak at a discussion about central-bank innovation hosted by the Bank for International Settlements, starting at 9 a.m. ET.

Data on sales of existing homes are due at 10 a.m., giving investors a fresh view into the booming housing market. Economists expect sales to have slipped in February, hampered by rising prices and poor weather in parts of the country.

In currencies, Turkey's lira slumped about 9% to trade at 7.93 per dollar after the replacement of the country's top central banker late last week. The slide may add to investors' nervousness around emerging-market assets, according to Jane Foley, head of currency strategy at Rabobank.

Combined with concerns about the trajectory of U.S. government bond yields, the slump in Turkey's currency means there is "plenty of scope for choppy trading conditions" in broader financial markets, Ms. Foley said.

In overseas markets, the Stoxx Europe 600 was almost unchanged. Shares of AstraZeneca rose 2% after the British drugmaker said its Covid-19 vaccine was shown to be safe and 79% effective in preventing symptomatic disease in U.S. clinical trials.

Shares of airlines including British Airways-owner International Consolidated Airlines Group dropped after U.K. officials and scientists cast doubt on the likelihood of international travel this summer. Several countries in continental Europe are grappling with halting vaccination programs and a jump in coronavirus cases.

Asian markets were mixed by the close of trading. China's Shanghai Composite Index rose 1.1%, while Hong Kong's Hang Seng Index ticked 0.4% lower. Japan's Nikkei 225 dropped 2.1%, led lower by car makers after a fire at a factory owned by semiconductor manufacturer Renesas Electronics.

Write to Joe Wallace at Joe.Wallace@wsj.com

 

(END) Dow Jones Newswires

March 22, 2021 09:46 ET (13:46 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.

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