Bank, materials and tech stocks lead markets to new all-time highs
Major U.S. stock indexes again set all-time highs Thursday as the market built on the previous day’s surge. Banks continued to lead the way as bond yields jumped, and small-company stocks soared again.
Bond yields in the U.S. and Europe, particularly in heavily indebted countries, jumped after the European Central Bank surprised investors by saying it will reduce the size of its monthly bond purchases. That sent interest rates higher, which makes it more profitable for banks to lend money.
Energy companies rose with the price of oil. Companies that make chemicals and other basic materials also climbed. Industrial companies and makers of household goods slipped, holding markets back from even larger gains.
“Bond yields are creeping higher as these central banks are easing off the pedal a bit,” said John Canally, an investment strategist for LPL Financial.
The Dow Jones industrial average climbed 65.19 points, or 0.3%, to 19,614.81. It had been up as much as 115 points earlier in the day. The Standard & Poor’s 500 index picked up 4.84 points, or 0.2%, to 2,246.19.
The tech-heavy Nasdaq composite had lagged behind the other major indexes over the last two weeks, but it rebounded and rose 23.59 points, or 0.4%, to 5,417.36.
The Russell 2000 index of small-company stocks jumped 21.87 points, or 1.6%, to 1,386.37.
The European Central extended its bond-buying economic stimulus program, as investors expected. It will spend about $579 billion through the end of 2017. But starting in March, it will begin spending less on bonds.
While the bank said it’s not getting ready to phase out its stimulus program, Canally said investors are starting to think about the time when the ECB will gradually stop buying bonds and will start raising interest rates in response to a healthier economy.
It’s “a big 180 from where we were a couple of months ago, where the market was pricing in negative rates for a long period of time,” he said. Government bond prices in Spain, Italy and Portugal fell, and yields rose sharply.
U.S. government bond prices also fell. The yield on the 10-year Treasury note rose to 2.41% from 2.34%. That drove banks’ stocks up because higher interest rates will enable banks to charge more for lending money. Goldman Sachs’ stock, which has surged 33% since the presidential election and is trading near its all-time high, rose 2.5% to $241.45. Bank of America shares went up 1.7% to $22.95.
European stocks climbed for the second day in a row. Germany’s DAX jumped 1.8%, and the French CAC 40 advanced 0.9%. The FTSE 100 in Britain rose 0.4%.
Specialty chemicals maker DuPont helped lead materials companies higher as it advanced 1.2% to $74.68. Competitor Albemarle rose 3.4% to $91.80.
Benchmark U.S. crude rose $1.07, or 2.1%, to $50.84 a barrel. Brent crude, the international standard, advanced 89 cents, or 1.7%, to $53.89 a barrel.
CVS Health, a drugstore operator and pharmacy benefits manager, dropped 3% to $78.11 as retailers of household goods weakened. Church & Dwight fell 2.4% to $43.79, and Mondelez, the maker of Oreos and other snack foods, fell 1.5% to $41.33.
Athletic apparel-maker Lululemon jumped 15% to $68.84 after its third-quarter results came in above Wall Street projections and it raised its annual profit forecast.
Tailored Brands, the parent of Men’s Wearhouse, soared 39.7% to $26.44 after it reported strong quarterly results and said it made progress in improving the performance of its struggling Jos. A. Bank business. A year and a half ago, it was trading around $60, but it has tumbled as the company tried to reduce Jos. A. Bank’s dependence on discounts.
Warehouse club operator Costco rose 2.4% to $157.59. It reported a mixed quarter, but Wall Street found some encouraging trends in its business and shares recovered some of their recent losses. Kelly Bania of BMO Capital Markets said the company might raise membership fees to deal with weaker sales, while Edward Kelly of Credit Suisse said the company’s growth should get stronger thanks to a new credit card and continued consumer spending.
Pharmaceutical companies continued to slip on concerns that President-elect Donald Trump will push for lower drug prices. Gilead Sciences fell 1% to $72.02.
Wholesale gasoline was little changed at $1.50 a gallon. Heating oil rose 1 cent to $1.63 a gallon. Natural gas jumped 9 cents to $3.70 per 1,000 cubic feet.
The dollar rose to 114.20 yen from 113.85 yen. The euro slipped to $1.0603 from $1.0759.
Gold fell $5.10 to $1,172.40 an ounce. Silver fell 18 cents to $17.10 an ounce. Copper slid 2 cents to $2.63 a pound.
In Asia, Japan’s Nikkei 225 surged 1.5%, and the Kospi in South Korea jumped 2%. Hong Kong’s Hang Seng index rose 0.3%.
UPDATES:
2:20 p.m.: This article was updated with closing prices, context and analyst comments.
This article was originally published at 7 a.m.
