Tech Stocks Drop As 10-Year Yield Surges Above 1.6%

Plus, the Labor Department’s February jobs report was stronger than expected, Kohl’s shares are down after a group of activist investors said the retailer is settling for being the “best of the worst,” and ViacomCBS shares jumped to a new all-time high after launching its Paramount+ streaming service.

Stocks were higher at the open with the Dow adding 105 points, or 0.3%. The S&P 500 rose 0.7%, while the Nasdaq gained 1%.

While stocks were up at the open, the major indexes fell early in the trading day as the U.S. 10-year Treasury yield popped above 1.6% to hit a 2021 high. As rates moved higher, high flying tech stocks slid lower with Tesla dropping more than 10%, and Peloton shares sinking more than 9%. “Tech has basically been the leading sector for a decade,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab. “Without a doubt the sector looks inflated, and it had the most room to give up, especially now that people are concerned about inflation.”

The Labor Department reported a surge of hiring in February as U.S. economic activity picked up with COVID-19 cases dropping steadily across the nation and as vaccine rollouts boost hopes for growth. Nonfarm payrolls jumped by 379,000 for the month, while the unemployment rate fell to 6.2%. “Today’s jobs report sets an extremely positive tone as we move into warmer months and the pace of COVID-19 vaccinations accelerates,” said Tony Bedikian, head of global markets at Citizens Bank. “While the labor market still has a lot of ground to make up, we are in a different place than we were a year ago and the economy seems poised for a strong rebound.”

Kohl’s shares are down over 2% this morning after a group of activists seeking to take over the retailer’s board said in a letter this morning that Kohl’s better-than-expected earnings report on Wednesday demonstrate the need for an overhauled strategy for the retailer. “The board seems to be content performing just slightly better than the worst companies in retail,” the group, which includes Macellum Advisors, Ancora Holdings, Legion Partners Asset Management, and 4010 Capital, said in a letter to Kohl’s shareholders. “‘Best of the worst’ is not a viable strategy, nor does it satisfy shareholders like us seeking long-term superior performance. Kohl’s is enormously well positioned with off-mall locations, which has significant advantages, but it also means Kohl’s competes against thriving off-mall players like TJX Companies, Ross Stores, Target, Old Navy and Burlington. We believe that a refreshed Board must oversee the development of a robust road map to compete for market share broadly in the soft goods, discretionary sector.”

Gap shares are up more than 4% after the retailer said it earned $0.61 per share, beating analysts expectations for earnings per share of $0.19, on revenue of $4.42 billion. For fiscal 2021, the retailer said it is anticipating net sales to be up a mid- to high-teens percentage compared to 2020 assuming it is able to return to a more normalized, pre-pandemic level of sales in the second half of the year. “We faced one of the most difficult years in our company’s history and, throughout, our teams showed resilience and determination as we navigated unprecedented disruption in our industry to set a course for long-term growth. Our powerful brands moved to offense with purpose-led marketing and strength in relevant categories, like Active and Fleece, allowing us to gain meaningful market share quarter-over- quarter in a fragmented environment. This was enabled by our $6 billion online business and advantaged digital capabilities allowing us to expand our reach to more than 183 million customers this year.” said Gap CEO Sonia Syngal in a press release. “We are focused on executing against our Power Plan 2023 and delivering profitable growth in 2021.”

And ViacomCBS shares hit a new all-time high this morning following this week’s launch of its Paramount+ streaming service. The new service offers a deep library of entertainment, ranging in content from the likes of Nickelodeon, MTV, and Comedy Central, to live sports and news. Paramount+ has two subscription tiers starting at $5.99 per month with ads, moving up to $9.99 a month without ads, with a live CBS network feed included with both tiers. ViacomCBS said in a statement that the ad-supported tier will drop the CBS feed and lower its price to $4.99 a month in June. The company expects to spend at least $5 billion per year on streaming by 2024, releasing dozens of new shows and movies to buoy the new streaming service.

Stocks We’re Watching

United Natural Foods Inc (NYSE: UNFI): Unified Natural Foods shares are up more than 7% over the last two days following the company’s announcement that it has extended its primary wholesale grocery distribution relationship with Whole Foods Market through September 27, 2027. “Since the onset of the COVID-19 pandemic, UNFI and Whole Foods have worked closely together to consistently deliver “better for you” foods to consumers throughout North America. This extension allows both companies to maintain focus on what is most important: continuing to meet the growing demand for healthy food at home as we navigate through the global pandemic,” said Steven L. Spinner, UNFI’s Chairman and Chief Executive Officer. “We look forward to continuing to play a very important role in the rapidly evolving foodscape and supply chain, while furthering our tradition of innovation, scale and efficiency.”