Dow, S&P 500 Open Slightly Higher

BY Dow Jones & Company, Inc. | ECONOMIC | 03/03/21 09:50 AM EST By By Will Horner

U.S. stocks opened slightly higher Wednesday as investors sold government bonds.

The S&P 500 rose 0.1%, while the Dow Jones Industrial Average edged higher 0.2%. The Nasdaq Composite Index also opened with modest gains of less than 0.1%, following declines in technology stocks Tuesday.

The yield on the 10-year U.S. Treasury bond ticked up to 1.462%, from 1.413% on Tuesday. That is still down from the 1.513% it hit last month. Yields rise when bond prices fall.

Major stock indexes have wavered in recent days between losses and gains. Some money managers have grown concerned that stimulus measures will lead to a spike in inflation, and erode the value of bond returns. Worries about inflation have also triggered bets that the Federal Reserve may start to boost interest rates in the next two years.

Top central bank officials have said the rise in yields reflect optimism about economic prospects, and that they plan to keep monetary policy loose to support the economy for the foreseeable future. Federal Reserve Gov. Lael Brainard said Tuesday that the recent tumult in the bond market is on her radar screen. She said she would be concerned if she " saw disorderly conditions or persistent tightening."

"This higher volatility is to be expected," said Seema Shah, chief strategist at Principal Global Investors. "What has taken us unawares is the timing of it because most people were expecting to see these issues come later in the year, or early next year."

Sentiment was briefly buoyed earlier in the day by signals that Democrats will seek to bridge differences over jobless benefits and other issues as they aim to complete a $1.9 trillion relief package in coming days. Mr. Biden also said the U.S. would have enough Covid-19 vaccines for all American adults by the end of May, two months earlier than he had previously said.

"The vaccine rollout is going extremely well compared to many expectations," said Mrs. Shah. "And at a time when it looks like the economy could recover on its own, we also have the prospect of fiscal stimulus in the background, and it is leading many people to upgrade their U.S. growth expectations."

Optimism about the better economic prospects is particularly fueling demand for shares in companies that would benefit when the economy returns to normal, said Chris Dyer, director of global equities at Eaton Vance. That includes banking and energy stocks, which are outperforming the technology sector this year.

"We can see light at the end of the tunnel of the pandemic," Mr. Dyer said. "The progress that has been made on vaccinations has led to confidence in the economic recovery and you have seen companies geared into that economic recovery do well in the last months."

Ms. Brainard on Tuesday signaled that the Federal Reserve won't dial back support for the economy until it is on a stronger footing, reiterating comments made by other officials.

"The Fed has indicated very strongly that they are willing to be patient, but also [that] the rising yields are an indication of strong growth, so that is a good environment for equities to be in," Mrs. Shah said.

Ahead of the market opening, Lyft rose over 4% after the ride-sharing company disclosed strong February ride figures late Tuesday. Competitor Uber also rose nearly 3%.

Investors are awaiting data on activity in the services sector from the Institute for Supply Management, due at 10 a.m. ET. The figures are expected to show that sectorwide activity expanded for a ninth consecutive month in February.

The Fed's beige book report, due at 2 p.m. ET, will offer the latest collection of business anecdotes, offering insights into how companies are gearing up for the reopening of the economy.

In commodity markets, Brent crude, the international benchmark for oil, rose 1.4% to $63.55 a barrel. Gold prices fell 1.3%.

Overseas, the pan-continental Stoxx Europe 600 was relatively flat.

Most major Asian indexes gained by the close of trading. China's Shanghai Composite Index rose almost 2%, while in Hong Kong, the Hang Seng jumped 2.7%. Japan's Nikkei 225 edged up 0.5%, and South Korea's Kospi rose 1.3%.

Write to Will Horner at William.Horner@wsj.com


  (END) Dow Jones Newswires
  03-03-21 0950ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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