Stocks rise as investors shake off inflation fears
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.