Weak Tech, Bank Stocks Pull Indexes Back From Record Highs

Traders Kevin Walsh, foreground left, and Michael Smyth, right, work on the floor of the New York Stock Exchange, Friday, Dec. 16, 2016. Major U.S. stock indexes ended slightly lower after an early gain faded away. (AP Photo/Richard Drew)
Traders work on the floor of the New York Stock Exchange, Friday. (AP Photo/Richard Drew)

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 percent, to 2,258.07. It had wobbled up and down through the day, never rising by more than 0.3 percent or falling by more than 0.3 percent.

The Dow Jones industrial average fell 8.83 points, or less than 0.1 percent, to 19,843.41. The Nasdaq composite fell 19.69, or 0.4 percent, to 5,437.16 after climbing above its record closing level earlier in the day. All three indexes remain within 1 percent 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 percent. 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 percent from 2.60 percent 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 percent 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 percent. Bank of America fell 50 cents, or 2.2 percent, to $22.66, and Regions Financial fell 32 cents, or 2.2 percent, to $14.20.

Technology stocks in the S&P 500 fell 0.8 percent. Software giant Oracle fell $1.76, or 4.3 percent, 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.

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,” said 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 percent.”

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

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.

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