FINANCIAL MARKETS
NEW YORK—Stocks held steady on Wall Street Thursday, and bond prices gave back some of their big gains from the prior day as a rally fueled by the Federal Reserve’s announcement on interest rates Wednesday faded.
The Standard & Poor’s 500 index slipped 3.88 points, or 0.2 percent, to 2,381.38. The Dow Jones industrial average fell 15.55 points, or 0.1 percent, to 20,934.55. The Nasdaq composite, meanwhile, rose 0.71 points, or 0.01 percent, to 5,900.76. The Russell 2000 index of smaller stocks also rose slightly, up 3.20 points, or 0.2 percent, to 1,386.03.
Yields ticked higher as bond prices fell. The yield on the 10-year Treasury note rose to 2.53 percent from 2.50 percent late Wednesday. It had plunged 0.11 percentage points the prior day, after the Fed threw cold water on speculation that it may get more aggressive in raising rates.
The Fed is hoping to lift rates gradually off their record lows, where they stayed for seven years following the 2008 financial crisis. With both economic data and inflation picking up recently, some investors began to consider the possibility that the Fed may try to raise rates four times this year. But the Fed on Wednesday stuck with its forecast for three.
That gradual pace is one reason investors remain enthusiastic about stocks in the face of rising rates, which historically have spooked stock holders because they can slow economic growth and corporate profits. With rates starting from such a low base and the pace set to be so slow, it may not be fair to call these Fed moves as “hiking” or “tightening,” said Rich Taylor, fixed-income client portfolio manager at American Century.
Taylor expects gains for the 10-year Treasury yield to remain modest, even with the Fed pledging more increases. Once the yield gets to 2.60 percent, he says many buyers will likely pounce given still-modest growth in the economy and inflation, which should help keep a lid on rates.
Thursday’s slight rise in yields dulled the appeal of dividend-paying stocks. Utility stocks in the S&P 500 index lost 1.1 percent, the biggest loss among the 11 sectors that make up the index. Health care stocks were also weaker than the rest of the index, following a strong start to the year.
Investors had been nervous about Wednesday’s Dutch election, where candidates were running on pledges to get the Netherlands out of the European Union and to close borders to migrants from Muslim nations. After the U.K. vote last summer to leave the European Union, investors were worried about whether a wave of nationalism across the continent could eventually break the European union apart.
Benchmark U.S. crude resumed its slide and slipped 11 cents to settle at $48.75 per barrel. It was the eighth drop for oil in the last nine days. Brent crude, which is used to price international oils, fell 7 cents to $51.74 a barrel.
Natural gas fell 8 cents to settle at $2.90 per 1,000 cubic feet, heating oil dropped close to a penny to $1.50 per gallon and wholesale gasoline rose 1 cent to $1.59 per gallon.