US stocks step back from all-time highs in choppy trading

Wall Street capped a choppy day of trading yesterday with stock indexes closing mostly lower after coming within striking distance of matching the market’s longest-winning streak of the year.

The S&P 500 fell 0.2 per cent after wobbling between small gains and losses most of the day. The modest pullback snapped the benchmark index’s five-day winning streak. A sixth day of gains would have matched the S&P 500’s longest-winning streak so far this year, though the index remains near its all-time high.

Losses by banks, industrial stocks and companies that rely on consumer spending, including cruise line operators, pulled the market lower, outweighing gains by Big Tech and communication services stocks. Energy stocks, the S&P 500’s biggest gainers so far this year, took the brunt of the losses as crude oil prices fell.

Stocks’ uneven finish came as investors continue to closely watch the bond market, with even minute changes in bond yields causing stocks to fluctuate. Bond yields also wavered yesterday. The 10-year Treasury yield, which influences interest rates on mortgages and other consumer loans, inched up to 1.62 per cent.

“The 10 year is remaining above 1.60 per cent,” said Sam Stovall, chief investment strategist at CFRA. “So, investors are in a sense girding themselves for higher inflation.”

The big technology names that rose sharply in 2020 were among the gainers. Apple rose 1.6 per cent, Google’s parent company added 1.4 per cent and Facebook rose two per cent. Tech stocks have moved in tandem with the bond market, so as some bond yields ticked lower on Tuesday, it moved technology stocks in the opposite direction.

Investors weighed new economic data that showed Americans cut back on spending last month, partly due to bad weather in parts of the country that kept shoppers away from stores, and partly due to their December and January stimulus payments running out.

Retail sales fell a seasonally adjusted three per cent in February from the month before, the US Commerce Department said yesterday. February’s drop followed soaring sales in January as people spent US$600 stimulus checks sent at the end of last year. In fact, the Commerce Department revised its January number upwards to 7.6 per cent from its previously reported rise of 5.3 per cent.

Meanwhile severe winter weather pushed industrial production down a sharp 2.2 per cent in February, reflecting a big decline in factory output.

“Investors are betting big that this economic malaise will dissipate as spring arrives for most of the country and more Americans get vaccinated. Further, President Joe Biden’s Administration started sending out US$1,400 stimulus checks to individuals last weekend.”

Some investors fear the stimulus could translate into inflation down the road, however, which has caused investors to sell bonds. When bond prices fall, their yields rise.