US STOCKS-Nasdaq surges as tech stocks roar back

* Rally in bank stocks cools as bond yields ease
* GameStop builds on Monday's 40% surge
* Indexes up: Dow 0.74%, S&P 2.01%, Nasdaq 4.10%

(Updates prices, adds analyst comment)
By Herbert Lash and Karen Pierog
March 9 (Reuters) - U.S. stocks advanced on Tuesday, with
the Nasdaq jumping about 4% to recoup its losses from the
previous session, as U.S. bond yields retreated and investors
scooped up battered technology stocks.
Tesla Inc TSLA.O jumped about 19%, while Apple Inc
AAPL.O , Amazon.com Inc AMZN.O and Microsoft Corp MSFT.O
gained between 3.3% and 4.4% after sharp losses in recent weeks
as a rise in yields raised concerns over their high valuations.
News that a $1.9 trillion coronavirus relief package was
nearing final approval sparked a spike in yields on Monday,
pushing the tech-heavy Nasdaq to end more than 10% below its
Feb. 12 closing high, confirming a correction for the index.
U.S. 10-year Treasury note yields US10YT=RR eased to as
low as 1.523% after hovering near 13-month highs of 1.613% in
the prior session. Longer-dated yields have jumped over the last
month as investors price in a faster-than-expected economic
rebound and higher inflation.
The market is adjusting to the new level in interest rates,
said Kristina Hooper, chief global market strategist at Invesco
in New York. Companies whose products and services are in demand
when the economy is doing well, known as cyclicals, and
small-cap stocks will outperform this year, she said. Tech will
end the year higher but not be the leader as it was in the past
year's rally.
“Today the 10-year is down a bit, and that takes pressure
off valuations, so tech is performing well,” Hooper said. “The
market is just about getting comfortable at this level of
rates.”
Rising interest rates disproportionately hurt high-growth
tech companies because they are valued on earnings expected
years into the future rather than profits earned in the short
term.
"Potential headwind for the market is (when) interest rates
rise further from this point over the short period ... since
they have risen too fast in too little time," said Michael
Sheldon, chief investment officer at RDM Financial in Westport,
Connecticut.
By 2:50 p.m. ET (1950 GMT), the Dow Jones Industrial Average
.DJI rose 234.05 points, or 0.74%, to 32,036.49, the S&P 500
.SPX gained 76.96 points, or 2.01%, to 3,898.31 and the Nasdaq
Composite .IXIC added 517.57 points, or 4.1%, to 13,126.73.
The rise in Treasury yields has accelerated a rotation from
"stay-at-home" winners to stocks primed to benefit from an
economic reopening, setting the blue-chip Dow .DJI on pace to
end at a record high on Tuesday.
While the Russell 2000 growth index .RLG jumped over 3.2%
on Tuesday, compared to a 0.7% rise in Russell 2000 value index
.RLV , it has sharply underperformed its value counterpart
since the start of the month.
Shares of Tesla TSLA.O surged 19% on Tuesday, rebounding
from a deep sell-off and putting the automaker on track for its
largest one-day gain in nearly eight years. The global economic outlook has brightened as vaccine
rollouts gain speed and the United States launches a massive new
stimulus package, the Organization for Economic Co-operation and
Development said, hiking its 2021 growth forecasts. The Democrat-controlled U.S. House of Representatives will
take up the relief bill on Wednesday, with the chamber's
expected approval leading to President Joe Biden's signing the
legislation into law later this week. The bank index .SPXBK dropped 0.39% after vaulting to a
new 14-year peak. Economy-linked financials .SPSY , materials
.SPLRCM and industrials .SPLRCI hovered near record highs.
GameStop GME.N was up 22%, building on Monday's rise of
over 40% on the video retailer's e-commerce strategy and
speculation that small investors will pour stimulus checks into
markets. Advancing issues outnumbered declining ones on the NYSE by a
2.31-to-1 ratio; on Nasdaq, a 3.58-to-1 ratio favored advancers.
The S&P 500 posted 37 new 52-week highs and no new lows; the
Nasdaq Composite recorded 214 new highs and 15 new lows.