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Dow hits record closing high on stimulus hopes

DOW

The benchmark S&P 500 was little changed amid concerns over rising interest rates

The Dow Jones Industrial Average hit a record closing high on Tuesday as cyclical sectors advanced on optimism over more stimulus to lift the U.S. economy from a coronavirus-induced slump.

However, the Nasdaq fell as technology stocks dropped, while the benchmark S&P 500 was little changed amid concerns over rising interest rates.

Sectors poised to benefit the most from a reopening economy, gained the most.

The S&P 500 banking index jumped as the yield on 10-year U.S. Treasuries hit its highest since February 2020.

We came into this week with a positive perspective on the Biden administration’s attempt to deliver a sizeable package, said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. Markets have greeted that with positive moves.

Utilities and real estate posted the biggest percentage losses among S&P 500 sectors. Utilities and real estate are often considered bond proxies and tend to move in tandem with Treasuries. Shares of homebuilders also fell. The PHLX Housing Index finished 2.5% lower.

Technology stocks dropped as well. The technology sector includes 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 advanced 63.82 points, or 0.2%, to 31,522.22, the S&P 500 shed 2.25 points, or 0.06%, to 3,932.58 and the Nasdaq Composite declined 47.98 points, or 0.34%, to 14,047.50.

Hopes of a quick business recovery this year have been boosted by a sharp drop in new coronavirus infections, progress in vaccinations and a stronger-than-expected fourth-quarter earnings season.

This week’s earnings reports from Hilton Worldwide Holdings Inc, Hyatt Hotels Corp, Marriott International Inc, Norwegian Cruise Lines and TripAdvisor Inc will indicated the trend in global travel demand.

Shares of cryptocurrency and blockchain-related firms climbed between 8% and 21% as bitcoin surpassed the $50,000 mark.

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