Honolulu, Hawaii 2021-01-12 17:55:00 –
Wall Street closed Tuesday’s volatile day with modest profits, but Treasury yields widened the recent rise.
The S & P 500 was up less than 0.1% after switching between small profits and losses for most of the day. Approximately 62% of the index companies rose, and the energy sector’s stock price recorded the largest rise as oil prices rose. Companies that rely on consumer spending have also helped the market rise, outpacing the decline in healthcare, telecommunications and technology stocks.
Small business equities continue to outpace the rest of the market, indicating investors are becoming more optimistic about the economic recovery. The Russell 2000 Index has risen to a record high.
Banks and other financial companies have joined the recent rise as Treasury yields have risen for the sixth straight day as the economy is expected to break out of the downturn after a strong recovery swept the world later this year. .. Bond yields can affect interest rates on mortgages and other consumer loans, boosting bank profits.
Sal Bruno, Chief Investment Officer of IndexIQ, said: “The potential for additional stimuli has increased, and some of the sectors that are likely to be beneficiaries in terms of price volatility have been rewarded.
The S & P 500 rose 1.58 points to 3,801.19. The Dow Jones Industrial Average rose 60 points (0.2%) to 31,068.69. The Nasdaq Composite Index added 36 points, or 0.3%, to 13,072.43. The three indices remain close to their all-time highs set on Friday.
In the optimistic wave of the future, the market is charging higher than recently. With the rollout of the coronavirus vaccine, Wall Street expects a significant recovery in economic and corporate profits as daily life begins to return to normal later this year. With the Democratic Party soon dominating the White House, the Senate, and the House of Representatives, expectations are high for the next stimulus to the economy.
But the profits are so great that critics say stocks and other investments simply seem too expensive. Some measures of stock market value are at the most expensive levels since 2000, when the dot-com bubble burst. This includes the amount paid by the investor for every $ 1 of profit the company makes.
Low interest rates and almost non-existent inflation have encouraged investors to continue to build on stocks, even though their prices are rising faster than their profits. However, long-term interest rates have begun to rise due to increased borrowing by the US government, economic growth, and expectations of future inflation. Yields on 10-year government bonds temporarily reached 1.18% on Tuesday and then returned to 1.14%. This is up from 1.12% at the end of Monday to less than 0.90% at the beginning of the year.
Andrew Slimmon, Portfolio Manager at Morgan Stanley Investment Management, said:
In addition to keeping investors away from expensive stocks, higher interest rates can make borrowing more expensive and have a particularly big impact on housing and other industries. That may mean additional pressure on the Federal Reserve trying to keep interest rates low to shake the economy from the weaknesses caused by the pandemic.
The Federal Reserve Board has purchased all types of bonds to support the economy, maintaining record low interest rates of near zero. The next policy meeting on interest rates will be two weeks later.
And despite all hope for the future, it remains dark now. Pandemics are accelerating around the world, with new and potentially more contagious variants of the coronavirus in particular. This has forced US employers to cut more jobs than they added in December, the first month since the economy collapsed in the spring.
Energy stocks have risen sharply as crude oil prices have risen. Occidental Petroleum rose 12.6%, the largest rise in the index, while Marathon Oil rose 9.8%.
General Motors surged 6.2% in excitement for the business units it is creating to sell electric delivery vehicles and equipment.
Stocks of small and medium-sized enterprises also rebounded. Small Caps’ Russell 2000 Index rose 36.95 points (1.8%) to 2,127.96, a record high. Investors have been leading the market for the past few weeks as they see them benefiting far more from a healthy economy than the giant stocks that have largely persisted through the pandemic.
“Value and financial stocks are beginning to show consistent outperformance against growth stocks,” said Slimmon. “But the higher the rate, the more challenging the treatise.”
Losing were some of the Big Tech stocks that cruised as telecommuting and other beneficial trends boosted profits. Microsoft was down 1.2%, Facebook was down 2.2%, and Google’s parent company was down 1.1%.
Profit will focus on Wall Street in the coming weeks as it reports how much the company has earned in the last three months of 2020. The bank is one of the first reports with some scheduled on Friday. Overall, analysts predict revenues will plummet by nearly 9% year-over-year across the S & P 500.
Also, hanging in the market is political uncertainty. Democrats are calling for a dismissal after President Donald Trump’s words instigated a crowd of supporters to attack the Capitol last week. The FBI has also warned of plans for armed protests nationwide in the days leading up to Joe Biden’s inauguration in the presidential election next week. ..
But investors have almost always overcome such plight and violence. Instead, they chose to focus on the economic recovery they are seeing along the way.
In Europe, the stock market was a bit low. The Asian market was mixed.
Stocks notch gains on Wall Street; Treasury yields climb Source link Stocks notch gains on Wall Street; Treasury yields climb