US STOCKS-S&P 500, Nasdaq slip as bond yields rise

* Ulta Beauty slumps as revenue forecast disappoints
* Benchmark yields approach one-year highs
* Three major indexes set for best week in six
* Indexes: Dow up 0.70%, S&P down 0.18%, Nasdaq drops 1.08%

(Updates prices, adds analyst comments)
By Herbert Lash
NEW YORK, March 12 (Reuters) - The S&P 500 slipped on Friday
after hitting an all-time high the prior session as rising U.S.
bond yields revived inflation worries and dulled the appeal of
high-growth technology shares.
The tech-heavy Nasdaq tumbled after rebounding more than 6%
over the past three sessions, while the blue-chip Dow scaled its
fifth consecutive record high.
Wall Street's main indexes are set for their best week in
five after President Joe Biden signed into law on Thursday one
of the largest U.S. fiscal stimulus bills and data reinforced
the outlook that the economy was on the path to a recovery.
A steady rise in U.S. Treasury yields has raised fears of a
sudden tapering of monetary stimulus, pressuring the main U.S.
stock indexes in recent weeks.
The yield on the benchmark 10-year note US10YT=RR hit
1.642%, the highest level since February of last year. US/
The bifurcation of the Dow and Nasdaq reflects an ongoing
sell-off in tech as investors buy cyclical and underpriced value
stocks that are expected to do well as the economy recovers.
For tech stocks to continue to flourish you need low rates,
and in effect slower growth, said Thomas Hayes, chairman and
managing member of hedge fund Great Hill Capital LLC.
But with the stimulus package the economy is likely to
expand 7% to 9% this year and pressure interest rates, he said.
"That's why you're seeing rates rise today because the
reopening is happening faster and stronger than anticipated. And
that's when value and cyclicals and economically sensitive
stocks outperform," Hayes said.
The speedy distribution of vaccines and more fiscal aid have
spurred concerns of rising inflation despite assurances from the
Federal Reserve to maintain an accommodative policy. All eyes
will be on the central bank's policy meeting next week for
further cues on inflation.
U.S. consumer sentiment improved in early March to its
strongest in a year, a survey by the University of Michigan
showed on Friday. By 2:22 p.m. EST, the Dow Jones Industrial Average .DJI
was up 228.31 points, or 0.7%, at 32,713.9, the S&P 500 .SPX
was down 7.12 points, or 0.18%, at 3,932.22 and the Nasdaq
Composite .IXIC dropped 144.70 points, or 1.08%, to 13,253.98.
The Nasdaq has been particularly hit by the sell-off in
recent weeks and confirmed a correction at the start of the week
as investors swapped richly valued technology stocks with those
of energy, mining and industrial companies that are poised to
benefit more from an economic rebound.
Value stocks .RLV added about 0.6%, while growth stocks
.RLG slumped 1.1% in a continuation of a rotation that began
late last year.
The high-flying but yield-sensitive group of stocks
including of Facebook Inc FB.O , Apple Inc AAPL.O , Amazon.com
Inc AMZN.O , Netflix Inc NFLX.O , Google-parent Alphabet Inc
GOOGL.O , Tesla Inc TSLA.O and Microsoft Corp MSFT.O , which
fueled the past's year rally, fell.
Tech .SPLRCT , communication services .SPLRCL and
consumer discretionary .SPLRCD indexes, which house these
mega-cap stocks, slipped the most among major S&P sectors.
The bank index .SPXBK jumped 1.2%, while financials
.SPSY and industrials .SPLRCI clinched new record levels.
Ulta Beauty Inc ULTA.O slumped about 8% after the
cosmetics retailer forecast annual revenue below estimates, as
demand for make-up products were under pressure due to extended
work-from-home policies. U.S.-listed shares of China-based JD.com Inc JD.O dropped
7% after three sources said it is in talks to buy part or all of
a stake in brokerage Sinolink Securities worth at least $1.5
billion. Declining issues outnumbered advancing ones on the NYSE by a
1.10-to-1 ratio; on Nasdaq, a 1.25-to-1 ratio favored decliners.
The S&P 500 posted 77 new 52-week highs and no new lows; the
Nasdaq Composite recorded 375 new highs and 12 new lows.

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