Traders wearing masks work on the floor at the New York Stock Exchange in New York, the US. Picture: REUTERS/BRENDAN MCDERMID
Traders wearing masks work on the floor at the New York Stock Exchange in New York, the US. Picture: REUTERS/BRENDAN MCDERMID

New York  —  The Dow Jones Industrial Average notched a record closing high on Tuesday as cyclical sectors gained on the prospect of more fiscal aid to lift the US economy from a coronavirus-driven slump.

The Nasdaq, however, dipped as technology stocks moved lower, while concerns over rising interest rates kept the benchmark S&P 500 little changed.

Sectors poised to benefit the most from a reopening economy, including energy and financials, had the biggest percentage gains. President Joe Biden has pitched a $1.9-trillion pandemic relief bill and is pressing Congress to pass it in the coming weeks to get $1,400 stimulus cheques to Americans and bolster unemployment payments.

The S&P 500 banking index climbed as the yield on 10-year US 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.”

Conversely, utilities and real estate were among the S&P 500 sectors with the biggest percentage losses. 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. Shares of home builders, which are rate-sensitive, also fell.

Technology stocks slipped as well. That 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.

Unofficially, the Dow Jones Industrial Average rose 61.52 points, or 0.2%, to 31,519.92, the S&P 500 lost 2.38 points, or 0.06%, to 3,932.45 and the Nasdaq Composite dropped 47.98 points, or 0.34%, to 14,047.50.

A 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 in 2021.

This week's earnings reports from Hilton, Hyatt Hotels, Marriott International, Norwegian Cruise Lines and TripAdvisor will be closely watched for signs of a pickup in global travel demand.

Shares of cryptocurrency and blockchain-related firms including Silvergate Capital, Riot Blockchain and Marathon Patent Group surged as bitcoin briefly climbed past $50,000.

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.

Reuters

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