Stocks fall as yields continue to climb; GameStop surges

Stocks moved solidly lower Thursday as the recent theme of the market — rising bond yields and falling prices of technology companies — continued to weigh on trading.

Shares of several companies embraced by online retail investors earlier this year were sharply higher, including GameStop, which surged 71%.

The S&P 500 index fell 1.7% as of 12:14 p.m. Eastern in afternoon trading. The Dow Jones Industrial Average was down 356 points, or 1.1%, to 31,669 and the Nasdaq Composite, which is weighted heavily toward technology companies, was down 2.5%.

Once again it was the bond market that was driving the stock market’s direction and investors’ moods. The yield on the 10-year U.S. Treasury note rose to 1.46%, a level not seen in more than a year and far above the 0.92% level it was trading at only two months ago. That indicated investors were moving money out of bonds, a sign of worries over higher inflation as well as confidence in economic growth. Every tick up in bond yields recently has corresponded with a tick down in stock prices.

“The bond market is reacting to the positive economic growth,” said Brent Schutte, chief investment strategist, Northwestern Mutual Wealth Management Company. “It means there’s some hope on the horizon.”

Technology stocks, which tend to have higher valuations, have been one of the victims of the rise in bond yields. As bond yields climb, more investors shift money into those higher yielding assets, which tends to negatively impact stocks that are priced for growth and not for regular dividend payouts.

Apple, Amazon, Facebook and Microsoft — all companies that pushed the stock market higher last year — were down 1.7% or more.