Bank, materials stocks lead way to new records
Major U.S. stock indexes again set all-time highs Thursday as the market built on the previous day’s surge. Banks continued to lead the way as bond yields jumped, and small-company stocks soared again.
Bond yields in the U.S. and Europe, particularly in heavily indebted countries, jumped after the European Central Bank surprised investors by saying it will reduce the size of its monthly bond purchases. That sent interest rates higher, which makes it more profitable for banks to lend money.
Energy firms rose with the price of oil. Companies that make chemicals and other basic materials also climbed. Industrial companies and makers of household goods slipped.
“Bond yields are creeping higher as these central banks are easing off the pedal a bit,” said John Canally, an investment strategist for LPL Financial.
The European Central Bank extended its bondbuying program, as investors expected. It will spend about $579 billion through the end of 2017. But starting in March, it will begin spending less on bonds.
While the ECB said it’s not getting ready to phase out its stimulus program, Canally said investors are starting to think about the time when it will stop buying bonds and start raising interest rates in response to a healthier economy.
It’s “a big 180 from where we were a couple of months ago, where the market was pricing in negative rates for a long period of time,” he said. Government bond prices in Spain, Italy and Portugal fell, and yields rose sharply.
U.S. government bond prices also fell. The yield on the 10-year Treasury note rose to 2.41% from 2.34%.
That drove banks’ stocks up because higher interest rates will enable banks to charge more to lend money.
Goldman Sachs’ stock, which has surged 33% since the presidential election and is trading near its all-time high, rose 2.5% to $241.45. Bank of America shares rose 1.7% to $22.95.
Specialty chemicals maker DuPont helped lead materials companies higher as it rose 1.2% to $74.68.
CVS Health, a drugstore operator and pharmacy benefits manager, fell 3% to $78.11 as retailers of household goods weakened. Mondelez, the maker of Oreos and other snack foods, fell 1.5% to $41.33.
Athletic apparel-maker Lululemon jumped 15% to $68.84 after its third-quarter results came in above projections and it raised its annual profit forecast.
Tailored Brands, the parent of Men’s Wearhouse, soared 39.7% to $26.44 after it reported strong quarterly results and said it made progress in improving the performance of its struggling Jos. A. Bank business.
Warehouse club operator Costco rose 2.4% to $157.59. It reported a mixed quarter, but Wall Street found some encouraging trends in its business.
Pharmaceutical companies continued to slip on concerns President-elect Donald Trump will push for lower drug prices. Gilead Sciences fell 1% to $72.02.
Benchmark U.S. crude rose 2.1% to $50.84 a barrel. Brent crude, the international standard, rose 1.7% to $53.89 a barrel. Wholesale gasoline was little changed at $1.50 a gallon. Heating oil rose 1 cent to $1.63 a gallon. Natural gas jumped 9 cents to $3.70 per 1,000 cubic feet.
The dollar rose to 114.20 yen from 113.85 yen. The euro fell to $1.0603 from $1.0759.
Gold fell $5.10 to $1,172.40 an ounce. Silver fell 18 cents to $17.10 an ounce. Copper slid 2 cents to $2.63 a pound.