Thursday, February 16, 2017
Associated Press
NEW YORK
Stocks and bond yields punched higher Wednesday, and U.S. indexes set records again, following more encouraging news on the U.S. economy.
It’s a striking reversal for the market from a year ago, when stocks around the world were tumbling on worries that another recession was on the way. Since then, the economy and job market have continued to improve, along with corporate profits. And the market got a jolt of adrenaline in November, when Donald Trump’s surprise White House victory raised hopes for tax cuts and other business-friendly policies from Washington.
The S&P 500 is up nearly 26 percent over the last 12 months, with more than half of the gain coming since Election Day. Such a performance would rank among the best calendar years the index has had in the last three decades.
On Wednesday, reports showed that retailers had stronger sales in January than economists expected, and inflation at the consumer level was the highest in years. Consumer prices rose 2.5 percent in January from a year earlier, the highest rate since March 2012. The data give the Federal Reserve more encouragement to raise interest rates, and economists said the possibility is increasing that it may happen at the central bank’s next meeting in March.
Fed Chair Janet Yellen indicated in testimony before a Congressional committee that the central bank will likely accelerate its pace of increases if the job market remains healthy and inflation keeps climbing. The Fed has raised rates just twice in the past two years, after holding rates at nearly zero from late 2008 to help lift the economy out of the Great Recession.
“What really stuck out to me in Yellen’s testimony was her adding emphasis to the idea that as things currently stand, even without fiscal stimulus, it would be prudent to hike sooner rather than later,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. “So if we do see tax cuts or infrastructure spending, they may need to quicken the pace of rate hikes. The bond market has clearly gotten the message.”
When bonds pay more in interest, it can mean less demand from income investors for stocks that pay big dividends. Utility stocks in the S&P 500, which are some of the biggest dividend payers, fell 0.4 percent.
Airline stocks cruised higher after Warren Buffett’s Berkshire Hathaway disclosed that it added to its investments in several of them.
Southwest Airlines rose $1.98, or 3.6 percent, to $57.29, United Continental rose $2.01, or 2.7 percent, to $75.75, Delta Air Lines rose $1.31, or 2.6 percent, to $51.17 and American Airlines rose 97 cents, or 2.1 percent, to $47.54.