Dow rises 300 points to touch a record, Nasdaq sheds 2% as rotation out of tech continues

The Dow Jones Industrial Average climbed on Monday as investors piled into economic comeback plays after Senate approval of a new Covid stimulus package, while a continuous sell-off in high-flying tech shares put pressure on the broader market.

The blue-chip benchmark gained 306.14 points, or 1%, to 31,802.44 led by Disney. At its session high, the 30-stock average jumped 650 points to hit an intraday record high. The S&P 500 erased a 1% gain to close 0.5% lower at 3,821.35. The Nasdaq Composite slid 2.4% in volatile trading to 12,609.16 as Apple dropped 4.2% and Tesla fell 5.8%. Alphabet and Netflix both slipped more than 4%.

The tech-heavy benchmark closed more than 10% below its Feb.12 closing high, falling into correction territory.

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.

Meanwhile, the Centers for Disease Control and Prevention said Monday people who've been fully vaccinated against Covid-19 can meet safely indoors without masks, further boosting reopening hopes. The positive news boosted stocks banking on a strong economic recovery.

Disney shares added more than 6% after California eased Covid rules, paving the way for Disneyland to reopen on a limited basis in April. American Airlines jumped nearly 5%, while United Airlines popped 7%. Target rose 2.5%.

"More stimulus could provide a big lift to the stock market, but it may come with some bumps," said Lindsey Bell, chief investment strategist at Ally Invest. "Runaway inflation worries have been a stumbling block for stocks as of late. Because of this, there could be more market weakness ahead as investors grapple with the short- and long-term effects of stimulus. High-flying stocks like tech and the 'stay at home' stocks may be hit the hardest."

Tech stocks remained the biggest losers on Monday, continuing the trend for the last few weeks. High-growth stocks, which were among the best performers last year, are particularly vulnerable as higher rates reduce the value of future cash flows.

Apple has fallen 15% in the past month, while Tesla has dropped 34% in that period. Pandemic bets Zoom Video and Peloton have tumbled 24% and 30% over the past month.

Sentiment got a boost earlier Monday 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. Amazon shares have fallen 11% over the past month.

The market rotation has created a big divergence among the major averages. For March, the Dow Industrials, leveraged more to the reopening, is up 2.8%, while the Nasdaq Composite is off by 4.4%. Meanwhile, the broader S&P 500 is up 0.3%.