Rising bond yields, company earnings boost US stocks - InfoNews

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Rising bond yields, company earnings boost US stocks

March 28, 2019 - 1:40 PM

Stocks finished broadly higher on Wall Street Thursday as bond yields rose, easing concerns about a troubling drop in long-term yields over the past week.

Gains in financial, technology and industrial stocks outweighed losses in utilities and communications companies. Smaller company stocks outgained the broader market.

Following a sharp rebound from a dismal end to 2018, the benchmark S&P 500 index is on track for its biggest quarterly gain since the third quarter of 2009.

Thursday's rally, which followed a stumble earlier in the day, came as bond yields rose off their recent lows. The yield on the benchmark 10-year Treasury note rose to 2.39 per cent from 2.37 per cent late Wednesday.

"The markets are looking closely at bond yields, and the fact that bond yields have eased a little bit is a reason for the stock market to breathe a little easier today," said Erik Davidson, chief investment officer at Wells Fargo Private Bank.

The S&P 500 gained 10.07 points, or 0.4 per cent, to 2,815.44. The Dow Jones Industrial Average rose 91.87 points, or 0.4 per cent, to 25,717.46. The Nasdaq composite added 25.79 points, 0.3 per cent, to 7,669.17.

The Russell 2000 index of smaller company stocks picked up 12.87 points, or 0.8 per cent, to 1,535.10.

Major indexes in Europe finished mostly lower.

Despite an uneven week of trading, the S&P 500 is still up 12.3 per cent so far in 2019, a blockbuster start to a year. Still, investors remain anxious about the slowing global economy and worrisome signals coming from the bond market.

Key bond yields fell to their lowest levels in more than a year last Friday and continued to slide this week after the Federal Reserve said it was seeing slower growth in the economy and no longer expected to raise interest rates this year.

Even after edging higher Thursday, the 10-year Treasury yield remained below the yield on the three-month Treasury bill. That kind of "inversion" in bond yields is an unusual phenomenon that has preceded recessions in the past.

"When the yield curve inverts, on average, it's about 18 months before the start of a recession," Davidson said. "That would still be a long ways off and the markets can still do pretty well between now and then."

The rise in bond yields gave bank stocks a boost. Citigroup gained 2.1 per cent. Higher bond yields are good for banks because they can earn more income from the bonds they hold and they can charge higher interest rates on loans.

Encouraging company earnings and outlooks also helped lift stocks Thursday.

Movado jumped 22.8 per cent after the watch maker reported strong earnings in its last quarter. Shares in PVH vaulted 14.8 per cent after the parent company of Calvin Klein and other brands turned in solid quarterly results.

Lululemon Athletica climbed 14.1 per cent after the athletic apparel retailer posted better-than-expected quarterly results and issued a positive outlook.

Accenture was the biggest gainer in the technology sector after the consulting company's latest quarterly results topped Wall Street's forecasts. The stock rose 5.2 per cent.

Verizon led the slide in communications services stocks, shedding 3 per cent.

Traders brushed off a discouraging U.S. economic snapshot. The Commerce Department said U.S. economic growth slowed sharply in the last three months of 2018 to an annual rate of just 2.2 per cent, reflecting weakness in consumer spending, business investment, government spending and housing.

Economists believe growth has slowed further in the current January-March quarter due to weaker growth prospects in China and Europe, the dampening effects on U.S. exports from the Trump administration's trade battles and the waning boost from the 2017 tax cut and government spending.

The more downbeat outlook for economic growth has prompted the Federal Reserve to signal that it plans to keep its benchmark interest rate on hold this year.

Looking ahead, investors have their eye on several potential market-moving developments.

Chinese and U.S. trade negotiators are preparing for the latest round of talks aimed at ending a tariff war between the world's two biggest economies. And in the United Kingdom, the countdown to Britain's departure from the EU loomed Friday.

In addition, the next big wave of corporate earnings kicks into gear in mid-April.

Benchmark U.S. crude fell 0.2 per cent to settle at $59.30 a barrel. Brent crude, used to price international oils, closed little changed at $67.82 a barrel.

In other energy futures trading, wholesale gasoline fell 0.8 per cent to $1.88 a gallon, heating oil slipped 0.4 per cent to $1.97 a gallon and natural gas dropped 0.3 per cent to $2.71 per 1,000 cubic feet.

Gold fell 1.6 per cent to $1,295.30 an ounce, silver lost 2.1 per cent to $14.97 an ounce and copper added 0.3 per cent to $2.87 a pound.

The dollar rose to 110.58 yen from 110.36 yen on Wednesday. The euro weakened to $1.1226 from $1.1263. The British pound fell to $1.3059 from $1.3262.

News from © The Associated Press, 2019
The Associated Press

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