The Morning Journal (Lorain, OH)
Stocks brush off wobble, return to records
Stocks brushed aside their first wobble of the year and got back to setting records.
NEW YORK » U.S. stocks brushed aside their first wobble of the year and got back to setting records on Thursday. Energy stocks led the way after the price of oil touched its highest level since 2014.
The gains for indexes marked a return to calm, after a whiff of nervousness wafted through markets a day earlier as interest rates rose. After rates held steady on Thursday, the Standard & Poor’s 500 index marked its seventh gain in the last eight days.
The S&P 500 rose 19.33 points, or 0.7 percent, to a record 2,767.56. The Dow Jones industrial average rose 205.60 points, or 0.8 percent, to 25,574.73, the Nasdaq composite gained 58.21 points, or 0.8 percent, to 7,211.78 and the Russell 2000 index of small-cap stocks surged 26.99 points, or 1.7 percent, to 1,586.79.
Optimism about a strengthening global economy and growing corporate profits have helped propel markets even though stocks have become more expensive than they’ve historically been relative to earnings.
The market’s smooth ride upward
hit a bump Wednesday when worries rose that a jump in interest rates could derail the ascent. Rates have been ultra-low since the Great Recession, a culmination of a decline in bond yields over the last three-plus decades.
“Everyone’s on edge about waiting for what’s to come,” even though central banks have promised to take a slow path toward higher rates, said Marina Severinovsky, investment strategist at Schroders.
“There shouldn’t be a fallingoff-the-cliff mentality, but we’re so primed,” she said. “We’re 30 years into this, waiting for the trigger.”
Rates retreated on Thursday after China’s foreign exchange regulator challenged a report that had helped drive up yields, which said China may slow or halt purchases of U.S. Treasurys. A U.S. government report on Thursday also showed that inflation was weaker on the wholesale level last month than economists expected.
The yield on the 10-year Treasury note dipped to 2.53 percent from 2.56 percent late Wednesday. It had climbed as high as 2.59 percent on Wednesday.
While a quick jump in rates could easily jolt markets out of the calm ride they’ve been on, investors say markets are prepared for a gradual rise.
“We’re all anticipating rising rates, and have been for some time,” Severinovsky said. “Given where global growth is, we should have higher rates than we do today.”
Energy stocks were the day’s biggest stars after the price of oil touched its highest price in more than three years. Benchmark U.S. crude gained 23 cents to settle at $63.80 per barrel after earlier climbing as high as $64.77. Brent crude, the international standard, gained 6 cents to $69.26 per barrel.
That helped drive energy stocks in the S&P 500 to a 2 percent gain, the largest among the 11 sectors that make up the index. They’re at their highest level since the end of 2016.