U.S. stocks rose Wednesday, with major indexes advancing in a broad rally as investors appeared to shake off fears of rising bond yields, helping equities resume a recent uptrend.
In a notable milestone for the day, an index of small-capitalization stocks jumped to a new record, extending a recent stretch of outperformance by small companies relative to their larger peers.
What did the main benchmarks do?
The Dow Jones Industrial Average DJIA, +0.25% rose 62.52 points, or 0.3%, to 24,768.93. The blue-chip average has risen in nine of the past 10 sessions.
The S&P 500 index SPX, +0.41% was up 11.01 points, or 0.4%, to 2,722.46. The day’s gains were broad, with nine of the 11 primary S&P 500 sectors ending higher. Materials were the top performers of the day, closing 1.2% higher, while consumer staples and consumer discretionary stocks both rose 0.8%. The two declining sectors — utilities and real estate — are seen as ones that underperform in periods of rising bond yields, as their higher-than-average dividend yields become less attractive to income-seeking investors.
The Nasdaq Composite COMP, +0.63% advanced 46.67 points, or 0.6%, to 7,398.30.
The small-cap benchmark Russell 2000 index RUT, +1.00% hit an all-time high of 1,620.64. The index also closed at a record, ending at 1,616.37, a gain of 16.03 points, or 1%.
What drove markets?
The day’s gains came despite the continuation of a few headwinds that have recently pressured trading, including in Tuesday’s session, where equities fell broadly. The yield on the 10-year Treasury note TMUBMUSD10Y, -0.09% rose to a seven-year high of 3.093%. The day’s action extended its move above 3%, which has been cited as a psychologically significant level that could make equities appear less attractive.
In addition, there was some political uncertainty surrounding North Korea, after Pyongyang overnight signaled its leader, Kim Jong Un, might pull out of next month’s summit with President Donald Trump if the U.S. insists on denuclearization for the isolated nation.
What were strategists saying?
“For the 10-year, 3% isn’t a magical number that will pull investors out of stocks. With inflation and interest rates being where they are, we think stock valuations are about right. Equities certainly aren’t cheap, but valuations aren’t a big concern right now,” said Anthony Saglimbene, global market strategist at Ameriprise.
Despite that, he struck a note of caution, saying it might be difficult for stocks to break out of their recent trading range and strike new highs.
“Investors seem less willing to push valuations higher than they used to be. We’re in something of a ‘show me’ environment, where simply meeting expectations isn’t going to be enough to lift prices anymore.”
Lisa Erickson, head of the traditional investments group at U.S. Bank Wealth Management, said: “Recent market action reflects a balance between risk and reward for investors. On the positive side, there is still growth momentum and solid earnings. But these are counterbalanced with risks on policy issues, trade talks and geopolitics like North Korea.”
What economic news was in focus?
Construction on new houses dropped 3.7% in April. The annual rate of new homes being built declined to 1.29 million last month from a revised 1.34 million pace in March that was the strongest since mid-2007.
Industrial production rose 0.7% in April, slightly above Wall expectations of a 0.6% increase.
Which stocks were in focus?
Shares in Macy’s Inc. M, +10.83% jumped 10.8% after the retailer reported upbeat sales and outlook. The stock helped retail broadly; the SPDR S&P Retail ETF XRT, +1.62% rose 1.5%. Among other retailers, J.C. Penney Co. JCP, +5.50% rose 5.5% and Kohl’s Corp. KSS, +1.95% climbed 2%.
Under Armour Inc. UA, +6.89% shares jumped 6%, adding to a year-to-date surge. The stock is up more than 37% since the start of the year.
Shares of Micron Technology Inc. MU, +4.61% rose 4.6% after RBC analyst Amit Daryanani initiated coverage of the stock with an outperform rating and an $80 price target.
Shares of IQVIA Holdings Inc. IQV, -2.91% fell 2.9%. The Food and Drug Administration raised serious concerns with the company’s data, which tracks the amount of pharmaceuticals sold in the U.S., and, in particular, data related to controlled substances like prescription fentanyl.
What did other markets do?
Gold futures GCM8, +0.06% rose slightly on the day, but that was enough to give it its first gain in four sessions.
European stocks SXXP, +0.21% ended modestly higher on the day, while Asian markets finished flat to lower.
Oil futures CLM8, +0.34% lost ground, dropping 0.2%, and the ICE U.S. Dollar Index DXY, -0.19% gained 0.1%.
