US stocks rallied strongly on Tuesday as big tech names such as Tesla and Apple roared higher after a sell-off the previous day.
The technology-heavy Nasdaq Composite gained 3.7 per cent, a day after the benchmark slumped into correction territory. Tuesday’s rise was the index’s best one-day performance since November.
Wall Street’s benchmark S&P 500 rose 1.4 per cent, giving the blue-chip index its second gain in six sessions.
Some analysts said the big move higher on Tuesday was propelled by so-called short covering, when investors who have bet on a stock falling need to purchase shares to close their trades. Citigroup analysts warned that such a shift could prove fleeting, which “could cap the size of the move”.
Greg Boutle, US head of equity and derivative strategy at BNP Paribas, called the surge in growth stocks “a relief rally from a very oversold condition.”
Shares in Tesla, which had sustained steep losses in recent sessions, were among the biggest winners, up 20 per cent by the closing bell. Graphics processor maker Nvidia and payments group PayPal were among the other leaders, rising 8 per cent and 7 per cent, respectively. Apple and Amazon, both companies with market values exceeding $1tn, rose around 4 per cent.
The more upbeat trading was in stark contrast to the previous day. Tech shares were among the worst Wall Street performers on Monday as traders shifted into more economically sensitive sectors such as banks and airlines.
“The market is a little confused right now at a fairly high level,” noted Tony Roth, chief investment officer at Wilmington Trust Investment Advisors. Traders were torn between cyclical stocks, he said, which are considered beneficiaries of the improving economic outlook and rapidly growing companies that had been shielded from the worst effects of the pandemic.
Elsewhere, GameStop, a favourite of retail traders who have swept markets since the start of the pandemic, soared by more than a quarter after adding 41 per cent Monday. The stock surge came after the company announced that its activist investor and Chewy.com co-founder Ryan Cohen would take the lead in transforming the gaming retailer into an ecommerce business.
A rebound rally in US government debt also picked up on Tuesday afternoon in New York after an auction of three-year notes saw “solid” demand, according to Ben Jeffery at BMO Capital Markets.
The Treasury department was able to offload $58bn of new debt at a yield of 0.355 per cent. The so-called bid-to-cover ratio, a key measure of demand, came in at 2.69, compared to an average of 2.39.
Benchmark 10-year Treasury yields fell roughly 0.05 percentage points on the day to trade around 1.537 per cent, while the yield on five-year notes slipped 0.04 percentage points to 0.82 per cent. Yields fall as prices rise.
The three-year auction is the first of three sales taking place this week. On Wednesday, the Treasury will issue $38bn of 10-year notes and it will sell $24bn of 30-year bonds on Thursday. Some investors have expressed concern about the market’s ability to digest this incoming supply, especially given a poor seven-year auction last month that sparked volatility in the world’s largest government bond market.
In Asia, China’s CSI 300 closed down 2.2 per cent, Hong Kong’s Hang Seng rose 0.8 per cent and South Korea’s Kospi lost 0.6 per cent.
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