Dow Sets Closing High in Mixed Trading; Bond Yields at One-Year High

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The Dow Jones Industrial Average posted a record close for a second day in mixed broader trading, as U.S. retail sales and producer prices surged in January and bond yields traded at their highest levels in a year.

The Dow on Wednesday finished up 90 points, or 0.29%, to 31,613, while the S&P 500 eased 0.03% and the tech-heavy Nasdaq Composite slid 0.58%.

The Dow spent the first half of the trading day largely lower and the second half higher. Leading the Dow higher: Verizon  (VZ) – Get Report, up 5.2%, and Chevron  (CVX) – Get Report, up 3%.

Warren Buffett’s Berkshire Hathaway  (BRK.A) – Get Report  (BRK.B) – Get Report disclosed in regulatory filings that it acquired significant stakes in both companies. Berkshire Hathaway also trimmed its stake in Apple  (AAPL) – Get Report by about 6%. Apple shares closed Wednesday trade off 1.8%.

Retail sales last month jumped 5.3%, well above economists’ estimates for growth of 1.1%. Stripping out auto and gasoline sales, retail sales jumped 5.9%, according to the Commerce Department.

U.S. producer prices, a measure of inflation at the wholesale level, rose 1.7% in the past year, higher than estimates of 0.9% and up from 0.8% in December.

The yield on the 10-year Treasury rose to a 52-week high of 1.33%. Investors continued to dump bonds amid signs of creeping inflation and the Federal Reserve’s commitment to keeping short-term lending rates anchored near zero. 

In minutes from its meeting at the end of January, the Federal Reserve noted that “economic conditions were currently far from the committee’s longer-run goals and that the stance for policy would need to remain accommodative until those goals were achieved.”

Improved vaccine rollouts, decreasing new case counts of the virus and expectations of more U.S. stimulus have some on Wall Street believing market sentiment has become too frothy.

Citigroup strategist Tobias Levkovich said U.S. stocks could pull back by 10% as “our current caution reflects several factors, including ebullient sentiment readings, stretched valuation levels and slipping earnings revision momentum.”

Stocks finished mixed on Tuesday, with the Dow closing at a record 31,522, up 0.2%. The S&P 500 and Nasdaq ended the session lower amid the surge in bond yields. Stocks of energy companies rose as a deep freeze in Texas boosted power and fuel demand.

Brent crude oil, the global benchmark, traded above $64 a barrel Wednesday as the cold snap in the South forced U.S. refineries and oil wells to shut down. Saudi Arabia said it would boost oil output in the coming months.

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