Stocks are flat as Wall Street tries to rebound from Monday's losses - CNBC

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Stocks traded along the flatline on Tuesday as traders weighed rising interest rates and a potential economic recovery from the coronavirus pandemic.

The Dow Jones Industrial Average rose 56 points, or 0.2%. The S&P 500 was flat, and the Nasdaq Composite climbed 0.4%.

Intel and Chevron each rose more than 2% to lead the Dow higher. Bank stocks rose broadly, with Goldman Sachs, Bank of America, JPMorgan Chase and Wells Fargo all gaining more than 2%.

The benchmark 10-year note yield rose to 1.165%, hitting its highest level since March. The 30-year bond rate climbed 1.89%.

"There has been a short-term tone shift in the market," wrote Gregory Faranello, head of U.S. rates at AmeriVet Securities. "Markets have shifted in mindset as the Democratic ripple is digested short-term. The focus now turning to growth and inflation and perhaps a combination of both."

The move higher in rates comes as Democrats secured majorities in both the House and Senate, opening up the door for additional fiscal stimulus. Last week, President-elect Joe Biden promised an economic stimulus rollout, which he said will be "in the trillions of dollars."

However, these prospects have also pushed equity market valuations higher, raising concern among some investors that the market's rally to record highs may have gone too far, too fast.

DoubleLine Capital CEO Jeffrey Gundlach pointed out on Monday that stock valuations are high relative to historical standards, and are being underpinned solely by stimulus measures from the Federal Reserve. The S&P 500's forward price-to-earnings ratio was at 22.7, near its highest level since 2000.

"We've been concerned that stretched valuation multiples could get more stretched, setting the stage for a meltdown," wrote Ed Yardeni, CIO of Yardeni Research. "On the other hand, we are relieved to see corporate earnings continue to recover along with the US economy from the unprecedented two-month lockdown recession during March and April of last year."

Stocks were coming off a losing session, with the major averages closing lower on Monday. "Historically, when momentum and sentiment indicators are this stretched, the market is due for a period of consolidation," said Nationwide's Chief of Investment Research, Mark Hackett.

Wall Street is off a strong week of gains that brought all three major averages to record highs. Stocks shrugged off riots at the U.S. Capitol that led to the House Democrats introducing an article of impeachment on Monday against President Donald Trump for inciting the attack.

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Stocks are flat as Wall Street tries to rebound from Monday's losses - CNBC
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