The S&P 500 and Nasdaq have closed lower as climbing Treasury yields and prospects of rising inflation triggered valuation concerns, hitting shares of high-flying growth companies.
The Dow industrials ended higher, boosted by a surge in Walt Disney Co shares.
US benchmark 10-year Treasury yields were up at 1.37 per cent on Monday. Since the beginning of February, 10-year yields have risen about 26 basis points, on track for their largest monthly gain in three years.
Still, some analysts noted the stocks pullback was expected after a torrid rally this year and in 2020.
“This is a small pullback primarily because stocks got a little overheated and there are a few worries out there that people are making mountains of out molehills,” said Brian Reynolds, chief market strategist, at Reynolds Strategy.
He cited worries about the rise in Treasury yields but noted that junk bond yields hit record lows last week, suggesting there has been a shift from the safety of Treasuries to the riskiness of corporates among investors.
“That’s bullish for stocks,” he said.
Federal Reserve chair Jerome Powell is scheduled to speak before the Senate banking committee on Tuesday, and investors are expected to look for any potential changes to the central bank’s dovish outlook.
Shares of Apple Inc, Microsoft Corp, Alphabet Inc, Tesla Inc and Amazon.com Inc resumed their slide from the previous week.
Largely upbeat fourth-quarter earnings had powered Wall Street’s main indexes to record highs early last week, but the rally lost steam, in part due to fears of a potential snag in US vaccination efforts and inflation concerns emanating from stimulus measures.
Unofficially, the Dow Jones Industrial Average rose 29.08 points, or 0.09 per cent, to 31,523.4, the S&P 500 lost 30.2 points, or 0.77 per cent, to 3,876.51 and the Nasdaq Composite dropped 341.42 points, or 2.46 per cent, to 13,533.05.
The S&P 500 declined for five straight sessions, its longest such streak in a year.
Value stocks have outperformed growth shares in February, with investors betting on a rebound in industrial activity and a pickup in consumer demand as countries roll out vaccines to tame the pandemic.
The S&P 500 industrials and financial sector both rose, while energy stocks surged on higher oil prices.
Discovery Inc jumped after the media company said it was expecting 12 million global paid streaming subscribers by the end of February, as coronavirus-led restrictions kept people at home.
Kohl’s Corp gained after a group of activist investors nominated nine directors to the department store chain’s board.
Principal Financial Group Inc added after a media report that activist investor Elliott Management Corp had taken a stake in the life insurance company and planned to push for changes.