Retail and technology stocks led Wall Street higher on Wednesday as the small-cap Russell 2000 hit a record peak, even as U.S. bond yields touched near a seven-year high and investors fretted over geopolitics.
The Dow Jones Industrial Average rose 62.52 points, or 0.25 per cent, to 24,768.93, the S&P 500 gained 11.01 points, or 0.41 per cent, to 2,722.46 and the Nasdaq Composite added 46.67 points, or 0.63 per cent, to 7,398.30.
Smaller companies continued to outperform their larger rivals with the Russell 2000 reaching a record level. The index was last up almost 1 per cent.
“Small caps present a cleaner play than large caps on two fundamental market drivers: lower corporate taxes and a stronger US economy,” research firm DataTrek wrote in its morning briefing on Wednesday.
Macy’s shares were up 10.8 per cent after beating analyst estimates and raising guidance. The S&P 500 Department Store index was up over 5 per cent, its largest daily gain in nearly six months.
Rival department stores J.C. Penney, Kohl’s, Nordstrom and Target Corp were also boosted by the results.
Macy’s earnings pushed the consumer discretionary sector higher on Wednesday, a day after government data showing an acceleration of consumer spending fanned inflation concerns and helped send U.S. government bond yields higher.
U.S. Treasury yields ended slightly higher on Wednesday, with the 10-year yield touching near a seven-year high, following a bond market selloff spurred by signs the U.S. economy is on a stronger footing in the second quarter.
“I think bonds are almost becoming an attractive alternative to equities,” said David Carter chief investment officer, Lenox Wealth Advisors in New York. “Not yet, in our opinion, but as yields continue to rise, we may get there soon.”
Weeks of diplomatic progress were thrown into doubt when North Korea postponed high-level talks with Seoul and threatened to pull out of its historic meeting with the United States.
The uncertainty compounded investor jitters ahead of United States-China trade negotiations.
“Tweets and tariffs are making the market a little uncomfortable and uncertain,” Carter said. “It doesn’t help markets, but it’s not necessarily knocking them down.”
On the economic front, housing starts fell 3.7 per cent in April while new housing permits declined 1.8 per cent, according to the Commerce Department.
In Toronto, the S&P/TSX composite index finished up 10.25 points, or 0.06 per cent, at 16,108.06.
Materials stocks rose 0.5 per cent, led by a 5-per-cent increase by First Quantum Minerals Ltd. and 4.8-per-cent rise by West Fraser Timber Co. Ltd.
Energy stocks rose 0.3 per cent with Shawcor Ltd. rising 3.2 per cent and Tourmaline Oil Corp. up 1.9 per cent.
A 2.1-per-cent decline by Hydro One Ltd. led utilities lower on the day. Northland Power Inc. fell 2.2 per cent, while Boralex Inc. was down 1.9 per cent.
In Italy, investors seized on a report that the anti-establishment 5-Star Movement and the far-right League party plan to ask the European Central Bank to forgive 250 billion euros (US$296-billion) of Italian debt, according to a draft the parties are working on.
Italian stocks tumbled 2.3 per cent while Italy’s 10-year bond yield jumped nearly 19 basis points to 2.13 per cent .
“It’s right to resonate with markets because it tells you about the sense of the wisdom between these negotiating parties,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.
Other major European stock markets were higher, and the pan-European FTSEurofirst 300 index rose 0.19 per cent, supported by the weaker euro.
MSCI’s gauge of stocks across the globe gained 0.26 per cent.
North Korea threw next month’s summit between Kim Jong Un and U.S. President Donald Trump into doubt by saying it may reconsider if Washington insists it unilaterally gives up its nuclear weapons.
“Investors have gotten sort of used to this. Whether we are talking about North Korea or the trade discussions with China ... I think investors are recognizing we are at the beginning of the beginning of this, so it’s not anything to make dramatic portfolio moves or any significant bets on,” Nixon said.
Oil prices gained on Wednesday, shaking off the effects of a strengthening dollar, after an inventory report showed U.S. crude and gasoline stocks fell more than expected.
Brent crude futures gained 85 cents to settle at $79.28 a barrel, while U.S. crude futures gained 18 cents to settle at $71.49 a barrel.
“We rallied as the day went on,” said Gene McGillian, manager of market research at Tradition in Stamford. “We continued to receive support from concerns about supply from the Iranian nuclear accord, Venezuela ... as well as the draw in crude,” McGillian said.
U.S. crude inventories fell by 1.4 million barrels in the week to May 11, compared with analyst expectations for a 763,000 barrel decrease.
U.S. gasoline stocks fell 3.79 million barrels, according to the U.S. Energy Information Administration’s weekly report. Analysts had expected a 1.42 million barrel decline. That helped push gasoline futures to their highest levels since October 2014.
“The strength of gasoline, which made new highs, a 3-1/2-year high today ... helped pull up crude later in the session,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Reuters