The S&P 500 and the Dow Jones Industrial Average hit all-time highs on Tuesday as cyclical sectors gained on the prospect of more fiscal aid to lift the U.S. economy from a coronavirus-driven slump.
The Nasdaq, however, dipped as technology stocks moved lower.
Sectors poised to benefit the most from a reopening economy, including energy (.SPNY) and financials (.SPSY), had the biggest gains. President Joe Biden has pitched a $1.9 trillion pandemic relief bill and is pressing Congress to pass it in the coming weeks in order to get $1,400 stimulus checks to Americans and bolster unemployment payments. read more
The S&P 500 banking index (.SPXBK) jumped 3.2% as the yield on 10-year U.S. Treasuries hit their highest since February 2020.
"The reflation trade continues to push equity markets across all industries and multi-caps ... and this rally could continue in the near-term," said Tony Bedikian, head of global markets at Citizens Bank in Boston.
Conversely, utilities (.SPLRCU) and real estate (.SPRLCR) posted the biggest percentage losses among S&P 500 sectors, and technology stocks (.SPLRCT) also slipped. Utilities and real estate, because of their steady earnings and high dividend yields, are often considered bond proxies and tend to move in tandem with Treasuries.
The technology sector includes many stocks with high earnings multiples, which may also come under pressure with rising yields, according to some market analysts.
The S&P 500 backed off from session highs as yields rose on Tuesday, which reflected investor worries about the day's surge in bond yields, said Robert Phipps, director at Per Stirling Capital Management in Austin, Texas. Equities would likely tolerate a gradual ascent in rates, but a sprint higher could create turbulence, in his view.
"Even though interest rates are still really low, the stock market is going to be very, very sensitive to changes," he said.
The Dow Jones Industrial Average (.DJI) rose 97.56 points, or 0.31%, to 31,555.96, the S&P 500 (.SPX) gained 3.79 points, or 0.10%, to 3,938.62 and the Nasdaq Composite (.IXIC) dropped 25.65 points, or 0.18%, to 14,069.83.
A sharp drop in new coronavirus infections, progress in vaccinations and a stronger-than-expected fourth-quarter earnings season have reinforced hopes of a quick business recovery this year.
This week's earnings reports from Hilton Worldwide Holdings Inc (HLT.N), Hyatt Hotels Corp (H.N), Marriott International Inc (MAR.O), Norwegian Cruise Lines (NCLH.N) and TripAdvisor Inc (TRIP.O) will be closely watched for signs of a pickup in global travel demand.
Shares of cryptocurrency and blockchain-related firms including Silvergate Capital Corp (SI.N), Riot Blockchain (RIOT.O) and Marathon Patent Group (MARA.O) jumped between 8% and 21% as bitcoin briefly climbed past $50,000. read more
Investors will also focus this week on the minutes from the Federal Reserve's January meeting, where it reaffirmed its pledge to maintain a dovish policy stance.
Advancing issues outnumbered declining ones on the NYSE by a 1.04-to-1 ratio; on Nasdaq, a 1.17-to-1 ratio favored advancers.
The S&P 500 posted 75 new 52-week highs and no new lows; the Nasdaq Composite recorded 363 new highs and nine new lows.
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