Nasdaq slumps as surge in bond yields pressures tech stocks

The S&P 500 eased from a record high on Thursday while the tech-heavy Nasdaq shed more than 1% as a spike in US bond yields accelerated a move out of pandemic winner tech stocks and into economy-linked financials and industrials.

The Russell 1000 value index, which is heavily comprised of cyclical stocks such as financials and energy, added about 0.3% while the Russell 1000 growth index, which includes technology stocks, dropped about 1.3%.

The yield on the benchmark 10-year notes crossed 1.75% to hit a 14-month high, pressuring high-growth companies including Apple Inc, Facebook Inc, Netflix Inc , Amazon.com Inc and Microsoft Corp dropped between 1.3% and 2.2%.

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

The blue-chip Dow, on the other hand, hit another record high a day after the Fed projected strongest growth in nearly 40 years as the COVID-19 crisis winds down, and repeated its pledge to keep its target interest rate near zero for years to come.

"Investors are generally confident in the US equity story.. market has already gone a step ahead and worrying about inflation," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

A $1.9 trillion spending stimulus sparked fears of rising inflation that triggered a jump in longer-end Treasury yields, accelerating a rotation into value stocks at the cost of high-growth tech stocks.

Underscoring the staggered recovery in the labor market, latest data showed the number of American filing for jobless benefits unexpectedly rose last week.

A separate report indicated the Philly Fed business index jumped more than expected to its highest level since 1973.

At 11:33 a.m. ET, the Dow Jones Industrial Average rose 153.17 points, or 0.46%, to 33,168.54, the S&P 500 lost 15.76 points, or 0.40%, to 3,958.36 and the Nasdaq Composite lost 185.64 points, or 1.37%, to 13,339.56.

Bank stocks, sensitive to economic outlook, jumped about 4%, while sectors poised to benefit the most from a reopening economy including financials and industrials hovered near all-time highs.

In corporate news, Accenture jumped about 1.5% after the IT consulting firm raised its full-year revenue forecast and reported second-quarter revenue above analysts' estimates, as more businesses used its digital services to shift operations to the cloud.

Dollar General Corp dropped 6% after the company forecast annual same-store sales and profit below estimates, indicating the pandemic-fueled rush for lower-priced groceries was waning faster than expected.

The so-called meme stock AMC Entertainment rose 1.5% after the movie theater operator said it would have 98% of its US locations open from Friday.

Declining issues outnumbered advancers by a 1.4-to-1 ratio on the NYSE and by a 1.2-to-1 ratio on the Nasdaq.

The S&P 500 posted 73 new 52-week highs and no new low, while the Nasdaq recorded 225 new highs and 50 new lows.