By Caroline Valetkevitch
NEW YORK (Reuters) – The S&P 500 rose on Friday, with financial shares gaining as the benchmark Treasury yield jumped to its highest in nearly three years and offset declines in tech and other big growth names.
The Dow was also higher, while the Nasdaq was down on the day.
The S&P 500 financials sector was up about 1% and gave the S&P 500 its biggest boost, while technology was down 0.4% and put the most pressure on the benchmark index.
Investors are assessing how aggressive the Federal Reserve will be as it tightens policy after Fed Chair Jerome Powell this week said that the central bank needed to move “expeditiously” to combat high inflation and raised the possibility of a 50-basis-point hike in rates in May.
The yield on the 10-year Treasury note rose above 2.5%.
“The market’s really macro driven,” said Steve DeSanctis, small- and mid-capitalization equity strategist at Jefferies in New York.
“With rates up, tech stocks and Nasdaq will generally be down.” Higher rates are a negative for tech and growth stocks, whose valuations rely more heavily on future cash flows.
The defensive S&P 500 utilities index, which is considered a bond-proxy, hit a record high.
The Dow Jones Industrial Average rose 84.25 points, or 0.24%, to 34,792.19, the S&P 500 gained 12.19 points, or 0.27%, to 4,532.35 and the Nasdaq Composite dropped 51.24 points, or 0.36%, to 14,140.60.
Shares of growth companies like Microsoft Corp and Nvidia Corp eased after leading a Wall Street rebound this week.
Economists at Citibank are expecting four 50 basis points interest rate hikes from the Fed this year, joining other Wall Street banks in forecasting an aggressive tightening path against the backdrop of soaring inflation.
The U.S. central bank last week raised interest rates for the first time since 2018.
The Ukraine-Russia conflict will keep investors on edge over the weekend. Moscow signalled it was scaling back its ambitions in Ukraine to focus on territory claimed by Russian-backed separatists.
Declining issues outnumbered advancing ones on the NYSE by a 1.03-to-1 ratio; on Nasdaq, a 1.41-to-1 ratio favored decliners.
The S&P 500 posted 52 new 52-week highs and five new lows; the Nasdaq Composite recorded 64 new highs and 72 new lows.
(Additional reporting by Devik Jain and Amruta Khandekar in Bengaluru; Editing by Marguerita Choy)