US stocks have ended down but well off their lows of the day, with the Nasdaq staging a furious comeback late in the session as some investors appeared to be hunting for bargains even as they worried about rising interest rates.
While the Nasdaq .IXIC pared its losses in the Monday afternoon session it had earlier fallen as much as 10.37 per cent below its intraday record level reached on November 22.
Along with watching rising bond yields, investors are also anxiously awaiting this week's inflation data and what it will mean for US Federal Reserve monetary policy tightening, according to Peter Tuz, president of Chase Investment Counsel.
The analyst is also worried about the impact of the latest coronavirus case numbers on the fourth quarter earnings season which kicks off later this week.
"People remain concerned about what inflation looks like and how the Fed is going to act to mitigate the situation," said Tuz.
With Nasdaq paring its losses sharply during the session some investors were showing up looking for bargains after the sharp sell-off earlier in the day, according to Rick Meckler, a partner of Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
"It's the tension between large players in the market which have been reallocating from growth to value and retail investors who only have interest in the technology names," said Meckler.
"We've gotten to the point where you wonder if the roller coaster has peaked and is heading straight down. But fundamentally there's a lot of buyers in this market buying on the dip."
According to preliminary data, the S&P 500 lost 6.03 points, or 0.13 per cent, to end at 4,671.00 points, while the Nasdaq Composite gained 11.86 points, or 0.08 per cent, to 14,947.76. The Dow Jones Industrial Average fell 166.65 points, or 0.46 per cent, to 36,065.01.
Traders have ramped up their rate hike expectations since the Fed's minutes from the December meeting appeared to signal an earlier-than-expected rate rise.
Goldman Sachs said it expects the Fed to raise rates four times in 2022, compared to its previous forecast of three.
Earlier the benchmark 10-year Treasury yield rose to its highest level in nearly two years on Monday.
Nasdaq heavyweight Tesla dropped earlier in the session but the stock and regained lost ground to trade higher late in the session.
Meckler said retail investors appeared to flood back into the stock looking for a bargain after chief executive Elon Musk tweeted on Friday that the electric carmaker will raise the US price of its advanced driver assistant software.
Nike shares tumbled after HSBC downgraded the stock to "hold".