Wall Street drifts higher; Treasury yields slow their rise
Stocks notched modest gains Wednesday following another choppy day of trading on Wall Street, leaving the market near its recent record highs.
The S&P 500 inched up 0.2% after flipping between small gains and losses in the early going. Gains in several Big Tech companies, including Intel, Apple and Amazon, helped nudge the S&P 500 higher, even tough most of the stocks in the index fell. Those gains outweighed losses in industrial, materials and other sectors.
Treasury yields stalled after rising sharply since the beginning of the year. The benchmark 10-year yield dipped as concerns calmed that the Federal Reserve may curtail its purchases of Treasurys. Expectations of higher government spending and the possibility of inflation have helped drive bond yields higher.
“There’s a tug of war in the market right now as to whether or not inflation will remain muted,” said Quincy
Krosby, chief market strategist at Prudential Financial. “The market does not want to see inflation climb at a pace that forces the Fed’s hand.”
The S&P 500 rose 8.65 points to 3,809.84. The Dow Jones Industrial Average fell 8.22 points, or less than 0.1%, to 31,060.47. The techheavy Nasdaq composite added 56.52 points, or 0.4%, to 13,128.95.
Markets around the world have rushed higher recently on building optimism that a healthier economy is on the way because of the rollout of coronavirus vaccines and the prospect for more stimulus from a U.S. government soon to be run by Democrats.
Some of the biggest action has been in the bond market, where expectations for increased federal borrowing, economic growth and inflation have pushed longer-term Treasury yields to their highest levels since last spring.
The yield on the 10-year Treasury slowed its ascent, though, and dipped to 1.10% from 1.12% late Tuesday. Analysts said statements from two Federal Reserve officials a day earlier helped to calm concerns that it may curtail its purchases of Treasurys. Those purchases have helped keep rates low in hopes of boosting financial markets and the economy.
The concerns are reminiscent of the 2013 “taper tantrum,” when markets tumbled after the Fed said it expected to slow bond purchases as the economy recovered.
A bond auction Wednesday that drew strong demand also helped pull Treasury yields lower, Krosby said.
Low rates have been one of the main underpinnings for the stock market’s rise to records, even as much of the economy still struggles under the worsening pandemic. The 10-year yield has been spurting higher, up from 0.90% on Jan. 4, the day before two runoff elections in Georgia gave control of the Senate – and thus Washington – to Democrats.