Stocks, Bond Yields Rise Ahead of Trump Inauguration
January 20 2017 - 10:29AM
Dow Jones News
By Riva Gold
U.S. stocks, government bond yields and the dollar climbed
Friday ahead of President-elect Donald Trump's inauguration.
The Dow Jones Industrial Average rose 96 points, or 0.5%, to
19828 in recent trading, while the S&P 500 and Nasdaq Composite
gained 0.6%.
Since the November election, investors have broadly bought the
dollar and U.S. stocks and sold long-dated government bonds on
expectations for tax cuts, spending increases and rolled-back
regulation.
In the trading sessions leading up to Mr. Trump's inauguration,
however, some popular trades have waned.
The Dow industrials on Thursday erased its gains this year in
its fifth consecutive session of losses. Part of the reason for the
reversal: a pullback in big bank stocks.
Financials, the best-performing S&P 500 sector from Election
Day to year-end, lost ground in the past week as investors pulled
money out of the sector. The group is down 2.1% so far this week
and is now down 1.1% in 2017 through Thursday's close.
Financial sector funds snapped a 16-week streak of inflows and
industrial sector funds posted their biggest outflow since 2015,
according to fund-tracker EPFR Global, reversing popular trends
that followed the November election. Flows into gold funds hit a
10-week high.
The 10-year U.S. Treasury yield rose Friday to 2.495% from
2.461% Thursday, when expectations for higher U.S. rates after a
speech by Federal Reserve Chairwoman Janet Yellen sent it to its
biggest daily jump of the year. Yields move inversely to
prices.
The WSJ Dollar Index was last up 0.1%.
Mr. Trump is scheduled to deliver an inaugural address later
Friday as he is sworn in as the 45th U.S. president. Some investors
are hoping clarity from Mr. Trump on the new administration's
policy priorities will help reignite a stalled postelection
rally.
"We've got many generalities and not many specifics as far as
policies," said Jon Adams, investment strategist at BMO Global
Asset Management.
New details or a timeline on taxation and infrastructure
spending plans would be supportive of a further move higher for
stocks, he said, while possible changes to immigration and trade
policy changes pose risks to the market.
On Friday, the Dow resumed its climb, lifted in part by shares
of Procter & Gamble, which rose 2.6% after reporting a
smaller-than-expected fall in sales.
In other corporate news, American Express fell 1% after posting
lower fourth-quarter results. General Electric declined 2% after
the industrial giant's revenue fell more than expected.
Elsewhere, the Stoxx Europe 600 swung between small gains and
losses, as a steep climb in government bond yields lifted bank
shares but weighed on steady dividend-payers. Advances in the
financial sector were offset by a decline in real-estate and
health-care shares, leaving the pan-European index flat in
afternoon trading.
"If rates move up, financials are really the only sector where
you get traction and support for earnings growth," said Mr.
Foliot.
In a speech Thursday, Ms. Yellen signaled a gradual course for
interest-rate rises, noting she doesn't see the U.S. economy at
risk of overheating and doesn't expect growth to pick up much soon.
Ms. Yellen had said Wednesday that rates could be raised "a few
times a year" through 2019.
Separately, Mr. Trump's pick for Treasury secretary, Steven
Mnuchin reaffirmed the strength of the dollar Thursday following
comments from Mr. Trump earlier in the week that it was "too
strong."
In commodities, U.S.-traded crude oil rose 2.4% to $53.37 a
barrel amid signs of waning OPEC production.
Corrie Driebusch contributed to this article.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
January 20, 2017 10:14 ET (15:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.