Bond yields rise, stocks push to records as econ­omy cruises

The Trentonian (Trenton, NJ) - - BUSINESS - By Stan Choe

NEW YORK >> Stocks and bond yields punched higher Wed­nes­day, and U.S. in­dexes set records again, fol­low­ing more en­cour­ag­ing news on the U.S. econ­omy.

The Stan­dard & Poor’s 500 in­dex rose 11.67 points, or 0.5 per­cent, to 2,349.25. It’s the seventh straight gain for the in­dex and its longest win­ning streak in three and a half years. The Dow Jones in­dus­trial av­er­age rose 107.45 points, or 0.5 per­cent, to 20,611.86. The Nas­daq com­pos­ite rose 36.87, or 0.6 per­cent, to 5,819.44. Seven stocks rose on the New York Stock Ex­change for every five that fell.

It’s a strik­ing re­ver­sal for the mar­ket from a year ago, when stocks around the world were tum­bling on wor­ries that another re­ces­sion was on the way. Since then, the econ­omy and job mar­ket have con­tin­ued to im­prove, along with cor­po­rate prof­its. And the mar­ket got a jolt of adren­a­line in Novem­ber, when Don­ald Trump’s sur­prise White House vic­tory raised hopes for tax cuts and other busi­ness-friendly poli­cies from Wash­ing­ton.

The S&P 500 is up nearly 26 per­cent over the last 12 months, with more than half of the gain com­ing since Elec­tion Day. Such a per­for­mance would rank among the best cal­en­dar years the in­dex has had in the last three decades.

On Wed­nes­day, re­ports showed that re­tail­ers had stronger sales in Jan­uary than econ­o­mists ex­pected, and in­fla­tion at the con­sumer level was the high­est in years. Con­sumer prices rose 2.5 per­cent in Jan­uary from a year ear­lier, the high­est rate since March 2012. The data give the Fed­eral Re­serve more en­cour­age­ment to raise in­ter­est rates, and econ­o­mists said the pos­si­bil­ity is in­creas­ing that it may hap­pen at the cen­tral bank’s next meet­ing in March.

Fed Chair Janet Yellen in­di­cated in tes­ti­mony be­fore a Con­gres­sional com­mit­tee that the cen­tral bank will likely ac­cel­er­ate its pace of in­creases if the job mar­ket re­mains healthy and in­fla­tion keeps climb­ing. The Fed has raised rates just twice in the last two years, af­ter hold­ing rates at nearly zero from late 2008 to help lift the econ­omy out of the Great Re­ces­sion.

“What re­ally stuck out to me in Yellen’s tes­ti­mony was her adding em­pha­sis to the idea that as things cur­rently stand, even with­out fis­cal stim­u­lus, it would be pru­dent to hike sooner rather than later,” said Brian Ja­cob­sen, chief port­fo­lio strate­gist at Wells Fargo Funds Man­age­ment. “So if we do see tax cuts or in­fra­struc­ture spend­ing, they may need to quicken the pace of rate hikes. The bond mar­ket has clearly got­ten the mes­sage.”

Trea­sury yields jumped as in­vestors sold off bonds. The 10-year Trea­sury yield rose to 2.50 per­cent from 2.47 per­cent late Tues­day. The 30-year yield rose to 3.08 per­cent from 3.06 per­cent.

When bonds pay more in in­ter­est, it can mean less de­mand from in­come in­vestors for stocks that pay big div­i­dends. Util­ity stocks in the S&P 500, which are some of the big­gest div­i­dend pay­ers, fell 0.4 per­cent.

Air­line stocks cruised higher af­ter War­ren Buf­fett’s Berk­shire Hath­away dis­closed that it added to its in­vest­ments in sev­eral of them.

South­west Air­lines rose $1.98, or 3.6 per­cent, to $57.29, United Con­ti­nen­tal rose $2.01, or 2.7 per­cent, to $75.75, Delta Air Lines rose $1.31, or 2.6 per­cent, to $51.17 and Amer­i­can Air­lines rose 97 cents, or 2.1 per­cent, to $47.54.

Proc­ter & Gam­ble rose $3.26, or 3.7 per­cent, to $91.12 af­ter ac­tivist in­vestor Nel­son Peltz’s Trian Fund Man­age­ment dis­closed in a reg­u­la­tory fil­ing that it owns a stake in the com­pany.

Amer­i­can In­ter­na­tional Group sank to the big­gest loss in the S&P 500 af­ter re­port­ing a larger op­er­at­ing loss for the fourth quar­ter than an­a­lysts ex­pected. It fell $6.04, or 9 per­cent, to $60.85.

Fos­sil Group plunged $3.39, or 14.8 per­cent, to $19.48. The watch and ac­ces­sories com­pany gave a profit fore­cast for 2017 that fell well short of an­a­lysts’ pre­dic­tions, and it said it may lose money.

In Europe, the Ger­man DAX in­dex rose 0.2 per­cent, while the French CAC 40 rose 0.6 per­cent and the U.K.’s FTSE 100 added 0.5 per­cent. In Asia, Ja­pan’s Nikkei 225 in­dex rose 1 per­cent, Hong Kong’s Hang Seng rose 1.2 per­cent and the Kospi in South Korea gained 0.4 per­cent.

The dol­lar ticked up to 114.26 Ja­panese yen from 114.22 yen late Tues­day. The euro rose to $1.0591 from $1.0572, and the Bri­tish pound dipped to $1.2445 from $1.2465.

Bench­mark U.S. crude fell 9 cents to set­tle at $53.11 a bar­rel. Brent crude, the in­ter­na­tional stan­dard, fell 22 cents to $55.75 a bar­rel in Lon­don. Nat­u­ral gas rose 2 cents to $2.93 per 1,000 cu­bic feet, heat­ing oil fell a frac­tion of a penny to $1.63 per gal­lon and whole­sale gaso­line was vir­tu­ally flat at $1.55 per gal­lon.

MARK LEN­NI­HAN — THE AS­SO­CI­ATED PRESS FILE

Stock traders fol­low mar­ket ac­tiv­ity, at the New York Stock Ex­change. Bond yields climbed again on Wed­nes­day and U.S. stocks held close to their record highs af­ter more re­ports showed the econ­omy con­tin­ues to strengthen.

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