Dow, S&P 500 shake off slow start, reach new highs

Stocks closed mostly higher on Wall Street on Friday, shaking off an early slide and notching more record highs for the S&P 500 and the Dow Jones industrial average.

Drops in several big technology companies, however, pulled the Nasdaq lower.

The S&P 500 edged up after spending nearly all day in the red, while the Dow added 0.9%. The Nasdaq fell 0.6%. Another climb in bond yields helped pull money out of Big Tech companies, which have started to look expensive after months of soaring through the pandemic.

The S&P 500 rose 4 points, or 0.1%, to 3,943. The Dow Jones industrial average rose 293 points, or 0.9%, to 32,778. The Nasdaq fell 78 points, or 0.6%, to 13,319.

The Russell 2000 index of smaller companies rose 14 points, or 0.6% to 2,352.

“There’s been a little more volatility than usual, particularly because there’s a number of crosscurrents both tail winds and head winds,” said Michael Reynolds, chief investment officer at Glenmede Trust Co.

European shares ended lower, with tech the biggest decliner following the Tencent news. A resurgence of the virus in Italy coupled with division over AstraZeneca Plc’s coronavirus vaccine also hit sentiment. Burberry Group Plc rose following an announcement that the rebound in its fourth quarter has been stronger than analysts expected.

Markets were jolted on Friday by the surge in yields, after relatively smooth bond sales this week had eased concerns on the fixed-income outlook. The wave of stimulus and vaccine rollout in the U.S. is once more forcing investors to confront the prospect of excessive inflation. The focus now turns to the Federal Reserve decision next week.

“We think the U.S. 10-year yield has further room to go and could reach 1.80%,” said Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “Growth stocks maintain a high sensitivity to rates, which continues to suggest that they are quite overvalued.”