Weak tech, bank stocks pull indexes back from record highs

NEW YORK – Falling technology and financial stocks pulled U.S. indexes back from the edge of record highs on Friday. Bond yields gave up some of their big gains from the last few days, and the dollar downshifted from its sharp climb against other currencies.

The Standard & Poor’s 500 index fell 3.96 points, or 0.2 per cent, to 2,258.07. It had wobbled up and down through the day, never rising by more than 0.3 per cent or falling by more than 0.3 per cent.

The Dow Jones industrial average fell 8.83 points, or less than 0.1 per cent, to 19,843.41. The Nasdaq composite fell 19.69, or 0.4 per cent, to 5,437.16 after climbing above its record closing level earlier in the day. All three indexes remain within 1 per cent of their record highs.

Friday’s moves close a week where stocks slowed their sharp ascent since last month’s presidential election, and bond yields and the dollar continued their big gains. A driving force was the Federal Reserve’s move on Wednesday to raise interest rates for only the second time in a decade and indicate several more increases may be in store for 2017.

The dollar gave back a smidgen of its gains on Friday. The ICE U.S. Dollar index, which measures the dollar against six other currencies, dipped 0.2 per cent. The index remains close to its highest level in 14 years.

The yield on the 10-year Treasury likewise regressed a bit Friday, dipping to 2.59 per cent from 2.60 per cent late Thursday. It’s still near its highest level since 2014.

Friday’s drop in yields helped drive stocks that pay big dividends higher. They often trade in the opposite direction of interest rates on expectations that income investors will buy them when bond yields are dropping. Those sectors had struggled in recent days.

Utility stocks and real-estate investment trusts both rose 1.2 per cent on Friday, the largest gains among the 11 sectors that make up the S&P 500.

Banks and other financial stocks fell in a rare off-day. The sector has been cruising since last month’s election on expectations that higher interest rates will boost their profits.

Financial stocks in the S&P 500 fell 0.9 per cent. Bank of America fell 50 cents, or 2.2 per cent, to $22.66, and Regions Financial fell 32 cents, or 2.2 per cent, to $14.20.

Technology stocks in the S&P 500 fell 0.8 per cent. Software giant Oracle fell $1.76, or 4.3 per cent, to $39.10 after reporting revenue for its latest quarter that fell short of analysts’ expectations.

Despite drops for the S&P 500 and other indexes, more stocks rose on the New York Stock Exchange than fell.

Among them was Chipotle Mexican Grill, which jumped $9.72, or 2.5 per cent, to $392.07. The restaurant chain said four new directors will join its board as part of an agreement with activist investor Bill Ackman’s Pershing Square.

Jabil Circuit rose $2.58, or 12 per cent, to $24.15 after reporting stronger earnings for its latest quarter than analysts expected.

Big gains since last month’s election mean stocks generally are more expensive relative to their earnings, a key gauge investors use to measure whether the market is overpriced.

The S&P 500 is trading at about 19 times its earnings per share over the last 12 months, according to FactSet. That compares with its average price-earnings ratio of 15.6 over the last 15 years and is an indication that stocks are, if not expensive, no longer cheap. And that, in turn, implies lower future returns than the big gains investors have enjoyed since the Great Recession’s end.

“I do think we’re in a low-return environment,” says Bernie Williams, chief investment officer for USAA’s Wealth Management Investment Solutions. “Of course, we thought that at the start of this year, too, and here we are up 10 per cent.”

In foreign stock markets, Japan’s Nikkei 225 gained 0.7 per cent, South Korea’s Kospi rose 0.3 per cent and Hong Kong’s Hang Seng fell 0.2 per cent. In Europe, Germany’s DAX rose 0.3 per cent, France’s CAC 40 rose 0.3 per cent and Britain’s FTSE 100 rose 0.2 per cent.

Crude oil rose $1 to settle at $51.90 a barrel in New York. Brent crude, the international standard, rose $1.19 to close at $55.21 a barrel in London. Natural gas slipped nearly 2 cents to settle at $3.415 per 1,000 cubic feet, wholesale gasoline rose 1.5 cents to $1.56 a gallon and heating oil rose 3 cents to $1.67 a gallon.

Gold recovered a bit after falling to its lowest price in 10 months on Thursday. It rose $7.60 to settle at $1,137.40 an ounce. Silver rose nearly 26 cents to $16.22 an ounce, and copper fell 3.6 cents to $2.56 a pound.

The euro rose to $1.0433 from $1.0424, the British pound rose to $1.2476 from $1.2436 and the dollar climbed to 118.01 Japanese yen from 117.93 yen.