A choppy day of trading on Wall Street ended with stocks mostly lower Monday, as a late-afternoon burst of selling derailed the market from another all-time high.
The S&P 500 fell 0.3% after having been up as much as 1% earlier in the day and on pace to eclipse the record high it set last Thursday. The Dow Jones Industrial Average eked out a 0.1% gain, while the Nasdaq shed an early gain and slid 1.3% below the all-time high it set on Friday.
Bond yields moved solidly higher. Gold prices fell and energy futures mostly rose.
The market was higher for much of the day as traders were relieved to learn that President Joe Biden would nominate Jerome Powell for a second four-year term at the helm of the Federal Reserve, a vote of confidence in Powell’s handling of central bank policies during the brutal disruptions caused by the coronavirus pandemic.
While stocks initially rallied on the news, bonds sold off, pushing yields broadly higher. The yield on the 10-year Treasury rose to 1.63% from 1.54% late Friday.
Higher Treasury yields make the more expensive areas of the market, like technology stocks, less attractive, which may explain why there was more selling in stocks toward the end of the day as the bond market shifted.
“Growth areas of (the stock) market do not like higher bond yields,” said Willie Delwiche, investment strategist at All Star Charts. “Energy and financials, however, loved them.”
The S&P 500 fell 15.02 points to 4,682.94. The Dow gained 17.27 points to 35,619.25. The tech-heavy Nasdaq gave up 202.68 points to 15,854.76.
Small company stocks also fell. The Russell 2000 index dropped 11.81 points, or 0.5%, to 2,331.35.
U.S. stocks have been mostly pushing higher since early October as companies reported much stronger profits for the summer than analysts expected. The benchmark S&P 500 has posted a weekly gain in eight out of the last nine weeks, notching successive record highs along the way.
Still, investors are seeking reassurance about how companies will fare in coming months as they grapple with higher raw materials costs and supply chain problems that could crimp future profits. Consumers have so far absorbed higher prices, but analysts fear they could eventually rein in their spending if higher prices persist too long.
The Federal Reserve is starting to trim bond purchases that have helped maintain low interest rates in an effort to support the economy and markets as rising inflation hangs over the economic recovery. Investors are closely watching the Fed to see whether pressure from rising inflation prompts it to speed up its plans for trimming bond purchases and raising its benchmark interest rate.
“Powell getting the nod is a sign that Biden is staying the course on monetary policy and the Fed is steadily moving toward normalizing policy,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “On the whole, the Fed is going to continue to be a force for monetary stability.”
More than 55% of the stocks in the S&P 500 rose Monday, but losses by big technology and communication companies outweighed gains elsewhere in the benchmark index. Chipmaker Nvidia slid 3.1% and Netflix fell 2.9%.
Rising bond yields helped boost banks, which rely on higher yields to charge more lucrative interest on loans. Bank of America rose 1.9%.
Energy companies were among the gainers, getting a bump as U.S. crude oil prices rose 0.9%. Chevron closed 1.8% higher. Companies that make household and personal care products made solid gains. Walmart rose 1.7% and supermarket operator Kroger rose 4.8%.
Companies that rely on consumer spending also weighed on the market, led by a pullback in shares of Target, which fell 2.5%, and Amazon, which lost 2.8%. Those retailers are on the cusp of the busy holiday shopping season, which traditionally kicks off right after the Thanksgiving holiday.
The dollar also strengthened against other currencies. The price of gold, a haven for when investors feel anxious, fell 2.4%.
Markets in Europe and Asia closed mixed as a resurgence of coronavirus outbreaks prompted some countries to look to stricter precautions to curb yet another wave of the pandemic.
Investors face a relatively light schedule of economic updates during this holiday-shortened week. The National Association of Realtors reported surprisingly good sales for previously occupied homes in October on Monday. The Commerce Department will report October data for new home sales on Wednesday, along with data on third-quarter gross domestic product.
Markets in the U.S. will be closed on Thursday for the Thanksgiving holiday. They will also close early on Friday.