Stocks rise as in­vestors shake off in­fla­tion fears

The Palm Beach Post - - BUSINESS - By Mar­ley Jay

NEW YORK — In­vestors saw some new hints that in­fla­tion is in­creas­ing on Wed­nes­day, but they still sent banks, tech­nol­ogy firms and con­sumer-fo­cused com­pa­nies climb­ing. That was a big change af­ter the mar­ket’s in­fla­tion-in­spired plunge ear­lier this month.

Af­ter a shaky start, stocks rose for the fourth straight day, and banks made some of the largest gains as bond yields reached new four-year highs. The move in yields came af­ter the gov­ern­ment said con­sumer prices climbed in Jan­u­ary a slightly faster pace than economists had ex­pected. A dif­fer­ent gov­ern­ment re­port showed re­tail sales were un­changed in De­cem­ber and slipped last month.

“I think the fears of the econ­omy over­heat­ing have been a lit­tle bit balanced out with the com­bi­na­tion of these two num­bers,” said Katie Nixon, chief in­vest­ment of­fi­cer for North­ern Trust Wealth Man­age­ment. “The bond mar­ket is not sug­gest­ing that run­away in­fla­tion is a deep con­cern.”

Stocks be­gan plung­ing Feb. 1 af­ter the La­bor Depart­ment said wages grew at a rapid clip in Jan­u­ary. In­vestors wor­ried that meant in­fla­tion was ris­ing and that it would push the Fed­eral Re­serve to start rais­ing in­ter­est rates more quickly, mak­ing it more ex­pen­sive for peo­ple and busi­nesses to bor­row money. That would slow down eco­nomic growth as well growth in as cor­po­rate prof­its.

The Stan­dard & Poor’s 500 in­dex rose 35.69 points, or 1.3 per­cent, to 2,698.63. The Dow Jones in­dus­trial av­er­age added 253.04 points, or 1 per­cent, to 24,893.49. The Nas­daq com­pos­ite climbed 130.10 points, or 1.9 per­cent, to 7,143.62. The Rus­sell 2000 in­dex of smaller-com­pany stocks rose 27.15 points, or 1.8 per­cent, to 1,522.10.

The yield on the 10-year Trea­sury note rose to 2.91 per­cent, its high­est mark in four years, from 2.84 per­cent a day ear­lier. That

helped banks, as the higher in­ter­est rates make lend­ing more prof­itable. But it hurt high-div­i­dend com­pa­nies like util­ity and phone com­pa­nies. Those stocks are of­ten com­pared to bonds be­cause of their big div­i­dend pay­ments and rel­a­tively steady prices, but in­vestors find them less ap­peal­ing when bond yields are ris­ing.

Amer­i­cans cut back on pur­chases of cars, fur­ni­ture and a va­ri­ety of other prod­ucts in Jan­u­ary. The Com­merce Depart­ment also low­ered its es­ti­mate for spend­ing in De­cem­ber. That came af­ter a three-month stretch that in­cluded the strong­est hol­i­day sales in a decade.

Re­tail­ers traded higher de­spite the tepid num­bers in the re­port. Ama­zon rose $36.54, or 2.6 per­cent, to a record high of $1,451.05, and Tif­fany added $2.15, or 2.1 per­cent, to $103.11. Nike picked up $2.09, or 3.2 per­cent, to $67.96.

Net­flix climbed af­ter the stream­ing video com­pany said it signed an­other big-name TV writer and pro­ducer to a pro­duc­tion deal. Ac­cord­ing to re­ports, “Glee” and “Amer­i­can Hor­ror Story” pro­ducer Ryan Mur­phy re­ceived a $300 mil­lion deal that will span five years. In Au­gust Net­flix an­nounced a deal with “Scan­dal” and “Gray’s Anatomy” cre­ator and pro­ducer Shonda Rhimes. Net­flix climbed $7.73, or 3 per­cent, to $266.

Chipo­tle Mex­i­can Grill soared af­ter nam­ing Taco Bell CEO Brian Nic­col to lead the com­pany. Chipo­tle has been hit hard by food safety scares over the last few years and has had trou­ble win­ning back cus­tomers. Founder Steve Ells re­signed as CEO in Novem­ber. The stock rose $38.58, or 15.4 per­cent, to $289.91. It traded above $700 in mid-2015.

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