Dow jumps 350 points as Senate passes stimulus, beat-up tech stocks fight into the green

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U.S. stocks climbed on Monday amid progress on a new Covid stimulus package, while tech shares with lofty valuations that got hit hard by rising yields staged a comeback.

The S&P 500 rose 0.7% led by financials, while the Dow Jones Industrial Average gained 350 points. The tech-heavy Nasdaq Composite erased earlier losses and traded 0.4% higher. Tesla gained 1% in volatile trading, while Peloton popped 5%. Amazon climbed 1%.

Sentiment got a boost after hedge fund manager David Tepper said the recent sharp rise in rates is likely over and it's hard to be bearish on stocks right now.

"Basically I think rates have temporarily made the most of the move and should be more stable in the next few months, which makes it safer to be in stocks for now," Tepper told CNBC's Joe Kernen, who shared the comments on "Squawk Box."

The benchmark 10-year yield has risen sharply in recent weeks in anticipation of more stimulus on top of a booming economic recovery. The 10-year Treasury yield rose 4 basis points to 1.6% Monday. The benchmark rate started the calendar year below the 1% mark.

Tepper believes the sell-off in Treasurys that has driven rates higher is likely over as big foreign buyers like Japan are poised to come in. He also said "bellwether" stocks like Amazon are starting to look attractive after the pullback.

The Senate passed a $1.9 trillion economic relief and stimulus bill on Saturday, paving the way for extensions to unemployment benefits, another round of stimulus checks and aid to state and local governments. The Democrat-controlled House is expected to pass the bill later this week. President Joe Biden is expected to sign it into law before unemployment aid programs expire on March 14.

The stimulus news boosted stocks banking on a strong economic recovery. Shares of retailers, energy companies and banks were higher.

Disney shares added 3% after California eased Covid rules, paving the way for Disneyland to reopen on a limited basis in April.

"We see higher rates largely as a function of earlier and stronger than expected economic recovery and supportive of our positive equity outlook," Dubravko Lakos-Bujas, JPMorgan's chief U.S. equity strategist, said in a note.

Amid rising rates, investors rotated into names tied to an economic reopening in recent weeks, while dumping high-flying tech shares. For March, the Dow Industrials, leveraged more to the reopening, is up 2.5%, while the Nasdaq Composite is off by 1.6%. Meanwhile, the broader S&P 500 is up 1.3%. The S&P 500 remains less than 3% from an all-time high.

The recent divergence between tech and cyclical plays shows that the bullish story remains intact, according to Mike Wilson, the chief U.S. equity strategist at Morgan Stanley.

"The bull market continues to be under the hood, with value and cyclicals leading the way. Growth stocks can rejoin the party once the valuation correction and repositioning is finished," Wilson said.

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