Stocks edge higher as bond yields, bank stocks rise

NEW YORK (AP) — Stocks were slightly higher in afternoon trading Friday, as a rise in bond yields helped lift the shares of banks.

Stocks have edged higher most of the week as investors weigh concerns about the virus tripping up a steady economic recovery against progress in vaccinations and business re-openings.

The S&P 500 index was up 0.2%, on track for its third straight weekly gain after reaching new record highs. The Dow Jones Industrial Average rose 82 points, or 0.3%, to 33,586 as of 1:08 p.m. Eastern. The Nasdaq rose 0.1%.

Bank stocks were among the better performers as a rise in bond yields translates into higher interest banks can charge to customers to borrow. Wells Fargo was up 1.4% and JPMorgan Chase was up 0.4%.

Technology stocks were also gaining ground and helping to pull the market higher. Apple rose 1.4% and Microsoft rose 0.5%.

Stocks have benefited this week as bond yields, which had been steadily ticking higher, retreated from highs hit earlier in the month.

Yields resumed their rise on Friday. The yield on the 10-year U.S. Treasury note, which influences interest rates on mortgages and other loans, rose to 1.65% from 1.63% late Thursday. It had been as high as 1.75% on Monday.

Most analysts expect inflation to increase as the economy improves.

“We’re seeing some evidence of inflation creeping into market place, but it’s not problematic,” Sandven said.

Investors are showing cautious optimism about the economic recovery, especially in the U.S., where vaccine distribution has been ramping up and President Joe Biden has advanced the deadline for states to make doses available to all adults to April 19.

“There’s optimism on the horizon that overall economic growth will continue as the year unfolds,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

But it's clear the recovery has a long way to go. The number of Americans who filed for unemployment benefits last week rose again last week, as many businesses remain closed or partially shut down due to the pandemic.

In remarks to the International Monetary Fund Thursday, Federal Reserve Chair Jerome Powell said a number of factors are putting the nation “on track to allow a full reopening of the economy fairly soon.”

Investors will turn their attention toward quarterly results starting next week, when earnings season gets underway. The major banks are among the first to report their results, including JPMorgan, Wells Fargo and Bank of America. Analysts polled by FactSet have hiked their profit forecasts during the quarter. They expect growth of just over 24%, compared with the view back in September that companies in the S&P 500 would see 13% growth.

“On balance, we’re seeing earnings accelerate to provide valuation support,” Sandven said.