U.S. Stocks Edge Higher; Yield Spike Hits Tech
(Bloomberg) -- U.S. stocks eked out a record, though rising Treasury yields continued to weigh on technology stocks. The dollar jumped.
The S&P 500 closed higher amid rallies in financial and industrial shares as the rotation into value shares resumed. The Nasdaq 100 Index gauge slumped after accelerating vaccinations in the U.S. and the passage of the $1.9 trillion pandemic-relief bill sent Treasury yields past 1.64%. The Dow Jones Industrial Average added to its all-time high.
“There’s been a little more volatility than usual, particularly because there’s a number of crosscurrents both tailwinds and headwinds,” said Michael Reynolds, investment strategy officer at Glenmede.
European shares ended lower, with tech the biggest decliner following the Tencent news. A resurgence of the virus in Italy coupled with division over AstraZeneca Plc’s Covid-19 vaccine also hit sentiment. Burberry Group Plc rose following an announcement that the rebound in its fourth quarter has been stronger than analysts expected.
Markets were jolted on Friday by the surge in yields, after relatively smooth bond sales this week had eased concerns on the fixed-income outlook. The wave of stimulus and vaccine rollout in the U.S. is once more forcing investors to confront the prospect of excessive inflation. The focus now turns to the Federal Reserve decision next week.
“We think the U.S. 10-year yield has further room to go and could reach 1.80%,” said Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “Growth stocks maintain a high sensitivity to rates, which continues to suggest that they are quite overvalued.”
Elsewhere, European debt dropped after authorities were said to have no intention of expanding stimulus despite their pledge to keep yields in check. Oil fell below $66 a barrel.
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