Gains in Utilities Shares Boost S&P 500
June 26 2017 - 5:19PM
Dow Jones News
By Christopher Whittall and Gunjan Banerji
Shares of utility companies and other dividend-paying stocks led
the S&P 500 to a slim gain following some tepid U.S. economic
data.
As investors turned to more defensive stocks that tend to offer
steady income, they dialed back on the year's biggest gainer, the
technology sector.
Overall moves were relatively muted. The Dow Jones Industrial
Average snapped a four-day losing streak, gaining 14.79 points, or
less than 0.1%, to 21409.55. The S&P 500 gained 0.77 points, or
less than 0.1%, to 2439.07. The tech-heavy Nasdaq Composite shed
18.10 points, or 0.3%, to 6247.15.
U.S. government bond prices and their stock-market proxies rose
after data from the Commerce Department showed demand for
long-lasting factory goods declined in May for the second-straight
month.
Utilities shares in the S&P 500 rose 0.8%, while
telecommunications, real estate and consumer-staples stocks also
gained.
Recent inflation figures have been lackluster, raising concerns
that further disappointing data could damp U.S. growth and change
the Federal Reserve's outlook for raising interest rates this year
and next, some analysts said.
"You wouldn't be buying utilities stocks if you thought that
rates were going to rise significantly," said John Serrapere,
director of research for Arrow Funds.
As U.S. government bonds strengthened, the yield on the 10-year
Treasury note fell for the third straight session, slipping to
2.135% from 2.146% Friday. Signs that inflation has softened have
pushed down bond yields in recent weeks.
Bank shares rose after Italian authorities said Sunday they were
prepared to spend as much as EUR17 billion ($19.03 billion) as part
of the shutdown of two regional banks.
The KBW Nasdaq Bank index of large U.S. commercial lenders rose
0.7% and the Stoxx Europe 600 banks subindex gained 0.9%. The Stoxx
Europe 600 rose 0.4%.
Italian banks have been a concern for years, weighed down by bad
loans, low profitability and insufficient capital. Their troubles
have cast a shadow over the wider European banking system, which
accounts for a large chunk of regional equity benchmarks.
"It is a very significant step," said Isabelle Mateos y Lago,
chief multiasset strategist at BlackRock.
"If finally the issue of [bad loans in] the Italian banking
system and overcapacity in some of the regional banks is being
addressed, it is a very positive signal," she added.
Shares in Intesa Sanpaolo, which is set to buy the best assets
of two troubled Italian lenders for a token fee, rose 3.5% in
European trading. Shares in Italy's largest lender, UniCredit,
gained 2.2%.
Elsewhere in Europe, food and beverage shares rallied following
news that billionaire activist investor Daniel Loeb's Third Point
hedge fund had taken a $3.5 billion stake in Nestlé. Shares in
Nestlé added 4.3%.
In Asia, the Shanghai Composite Index rose 0.9%, with Chinese
stocks continuing to perform strongly following MSCI's decision to
add them to its indexes. Gains there also helped boost Hong Kong
equities on Monday. The Hang Seng Index rose 0.8%.
In Japan, the Nikkei Stock Average rose 0.1%, with financial
stocks weighing on the broader index. Signs that interest rates
will remain low continue to weigh on Japanese financials, said
Hisao Matsuura, chief strategist for equities at Nomura Japan.
Write to Christopher Whittall at christopher.whittall@wsj.com
and Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
June 26, 2017 17:04 ET (21:04 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.