US Stocks Edge Higher After Lower Start02/24 11:25
Stocks were mostly higher on Wall Street Wednesday as investors continue to
cautiously monitor rising bond yields.
(AP) -- Stocks were mostly higher on Wall Street Wednesday as investors
continue to cautiously monitor rising bond yields.
They will be watching for comments from Federal Reserve Chair Jerome Powell
as well as updates on President Joe Biden's stimulus package to see where the
economy goes from here.
The S&P 500 index was up 0.6% as of 11:48 a.m. Eastern, after being down as
much as 0.6% earlier in the day. The Dow Jones Industrial Average rose 237
points, or 0.8% to 31,775 and the technology-heavy Nasdaq Composite, which has
taken a bigger blow in recent days from rising bond yields, was up 0.2%.
Treasury yields continued to climb, adding to a multi-week increase in rates
that are used as benchmarks for many kinds of loans including corporate debt
and traditional 30-year mortgages. The yield on the 10-year Treasury note rose
to 1.39%, the highest level in just over a year, but the yield is down from
earlier in the day. The tick down in bond yields correlated with the tick up in
stock prices early in trading.
The rise in bond yields has several implications for both the stock market
and overall economy. Higher yields make stocks with lofty valuations less
attractive. Those types of stocks tend to be technology companies, who are
priced typically for growth and not for a steady return of dividends like
mature companies like makers of consumer staples, utilities and real estate.
Apple, Microsoft and Amazon each fell about 1% or less. Those companies
rocketed in 2020 as investors bet that the pandemic would cause Americans to
shift shopping habits and buy gadgets to keep themselves occupied in pandemic
Bank stocks, which were hurt by lower interest rates last year, made some of
the strongest gains. The KBW Bank Index of 24 mid-to-large-sized banks was up
1.4%, despite the overall market being down. Banks would see higher profits if
interest rates were to keep rising. Another dose of stimulus would also shore
up the balance sheets of many Americans.
The bond market could also be a harbinger for inflation, something that has
been nonexistent in the U.S. for the better part of a decade. Powell told
Congress Tuesday the Fed didn't see a need to alter its policy of keeping
interest rates ultra-low, noting that the economic recovery "remains uneven and
far from complete." He will deliver a second day of testimony Wednesday.
The U.S. House of Representatives is likely to vote on President Biden's
proposed stimulus package by the end of the week. It would include $1,400
checks to most Americans, additional payments for children, and billions of
dollars in aid to state and local governments as well as additional aid to
businesses impacted by the pandemic.