Stocks rise, led by high-dividend sectors

Stocks posted solid gains Thursday as investors, comfortable that the Federal Reserve will keep interest rates low for now, bought up stocks that pay big dividends.

Real estate companies rose as investors looked for income. So did telecom stocks, which also typically pay higher-than-average dividends.

The Dow Jones industrial average rose 98.76 points, or 0.5%, to 18,392.46. The Standard & Poor’s 500 index gained 14.06 points, or 0.7%, 2,177.18 and the Nasdaq composite climbed 44.34 points, or 0.8%, to 5,339.52.

The newly created real estate component of the S&P 500 climbed 1.9%, far more than any other sector. The group is made up largely of real estate investment trusts, which enjoy certain tax benefits by paying out much of their income as dividends. San Francisco-based Digital Realty Trust saw its shares climb 2.7% to $98.09.

Telecommunications stocks also rose more than the rest of the market. AT&T rose 1.3% to $41.11. Verizon Communications rose 1% to $52.35.

Trading followed a pattern that has become familiar in the last several months. After hesitating or worrying that the Federal Reserve will raise interest rates, investors piled into high-dividend stocks after the Fed decided yet again to leave rates unchanged. The two best-performing parts of the S&P 500 this year are utilities and telecoms, up 18% and 15% respectively.

“It’s another example of the issues facing investors right now, particularly pension funds and retirement funds, that they are all chasing yield in the same places,” said Ian Winer, co-head of equities trading at Wedbush Securities.

Winer said he remains concerned how much more stocks can increase in the short term, with the U.S. presidential election coming and third-quarter company earnings reports around the corner.

“There’s plenty of data that doesn’t support the market here, but what else are you going to invest in?” he said.

The Fed’s decision to keep rates low also caused bond prices to rise and the U.S. dollar to fall against other major currencies, which in turn helped boost commodity prices, which are denominated in dollars.

The yield on the U.S. Treasury 10-year note fell to 1.62% on Thursday from 1.67%.

U.S. benchmark crude rose 98 cents to $46.32 a barrel. Brent crude, used to price international oils, rose 82 cents to $47.65 a barrel. Heating oil rose 2.5 cents to $1.45 a gallon, wholesale gasoline rose less than 1 cent to $1.40 a gallon and natural gas fell 7 cents to $2.99 per 1,000 cubic feet.

Energy companies followed oil prices higher. Murphy Oil rose 4.3% to $27.55 and Transocean rose 5.6% to $9.65.

Other commodities also rose, which helped materials stocks. Gold climbed $13.30, or 1%, to $1,344.70 an ounce, silver rose 33 cents to $20.10 an ounce and copper increased 4 cents to $2.19 a pound.

Mining giant Freeport-McMoRan jumped 4.2% to $10.98.

The dollar edged up to 100.89 yen from 100.51 yen. The euro rose to $1.1204 from $1.1173.

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UPDATES:

2:20 p.m.: This article was updated with closing prices and additional information.

This article was originally published at 10:50 a.m.