BY DAMIAN J, TROISE, AP Business writer
Stocks were mostly higher on Wall Street Wednesday as investors continued to watch rising bond yields cautiously.
You will be listening to comments from Federal Reserve Chairman Jerome Powell as well as updates to President Joe Biden’s stimulus package to see how the economy performs from here.
The S&P 500 Index rose 0.6% at 11:48 a.m. East after falling 0.6% earlier in the day. The Dow Jones Industrial Average rose 237 points, or 0.8%, to 31,775, and the tech-heavy Nasdaq Composite, which has taken a major blow in recent days due to rising bond yields, rose 0.2%.
Government bond yields continued to rise, fueling a multi-week spike in interest rates, which serve as the benchmark for many types of credit, including corporate bonds and traditional 30-year mortgages. The 10-year Treasury note yield rose to 1.39%, its highest level in a little over a year, but the yield is lower than it was earlier in the day. The decline in bond yields correlated with the rise in stock prices at the beginning of trading.
The rise in bond yields has various effects on both the stock market and the wider economy. Higher returns make stocks with high valuations less attractive. These types of stocks are typically technology companies, whose price is usually fixed for growth rather than a steady dividend yield, as is the case for mature companies such as consumer staples, utilities, and real estate.
Apple, Microsoft, and Amazon each fell 1% or less. These companies skyrocketed in 2020 as investors bet that the pandemic would cause Americans to change their shopping habits and buy equipment to keep themselves busy in pandemic quarantines.
Bank stocks, weighed down by lower interest rates over the past year, made some of the strongest gains. The KBW Bank Index of 24 medium-sized to large banks rose by 1.4% despite the overall decline in the market. Banks would make higher profits if interest rates continued to rise. Another dose of stimulus would also prop up the balance sheets of many Americans.
The bond market could also be a harbinger of inflation, which has not existed in the US for nearly a decade. Powell told Congress Tuesday that the Fed saw no need to change its policy to keep interest rates extremely low, noting that the economic recovery “remains uneven and nowhere near complete”. He will testify for a second day on Wednesday.
The US House of Representatives is expected to vote on President Biden’s proposed stimulus package by the end of the week. It would include $ 1,400 checks for most Americans, additional payments for children, and billions of dollars for state and local governments, as well as additional aid to businesses hit by the pandemic.
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