Stock markets around the world downshifted into neutral on Tuesday, and U.S. indexes remained close to their record highs. Bond yields rose after Federal Reserve Chair Janet Yellen said the central bank is still on track to raise interest rates gradually.
KEEPING SCORE: The S&P 500 was virtually flat at 2,328, as of 12:09 p.m. Eastern time. The Dow Jones industrial average rose 19 points, or 0.1 percent, to 20,431. The Nasdaq composite was close to flat at 5,765. The Russell 2000 index of smaller U.S. stocks was virtually unchanged at 1,329. Roughly two stocks fell for every one that rose on the New York Stock Exchange.
TAKING A PAUSE: Indexes are stalling following a strong run driven by stronger-than-expected corporate earnings, an improving economy and expectations for more help for businesses from Washington. On Monday, the S&P 500 rose for the fifth straight day and set a record. The S&P 500 is up 8.6 percent since Election Day.
FED WATCH: Yellen answered questions before a Senate committee, and she said that the strengthening job market and a modest move higher in inflation should warrant continued, gradual increases in interest rates.
It was Yellen’s first testimony before Congress since President Donald Trump took office. Many economists say Trump’s ambitious economic program could result in higher inflation, which could force the Fed to raise rates more quickly. The central bank raised rates in December for just the second time in a decade.
Waiting too long to raise interest rates "would be unwise" and could eventually force the Fed to raise rates rapidly to catch up, Yellen said in her Congressional testimony. But she also repeated the word "gradual" to describe expectations for future increases.
BOND YIELDS: Bond yields moved higher immediately following Yellen’s comments. The yield on the 10-year Treasury note rose to 2.49 percent from 2.43 percent late Monday. The yield on the 2-year Treasury rose to 1.24 percent from 1.21 percent, and the 30-year Treasury yield climbed to 3.09 percent from 3.03 percent.
DIVIDENDS DULLED: When yields rise and bonds are paying more in interest, demand drops for stocks that pay big dividends. Utility stocks in the S&P 500, which are some of the market’s highest yielders, fell 1 percent. It was the largest loss among the 11 sectors that make up the index. Real-estate investment trusts, which have relatively big dividend yields, were also weak.
Banks, meanwhile, can benefit from rising rates because they can charge more for loans. Financial stocks in the S&P 500 rose 0.8 percent, most in the index.
INFLATION GAUGE: A government report on Tuesday showed that inflation at the wholesale level was 1.6 percent in January, compared with prices a year earlier. That was in line with economists’ expectations, who say overall inflation appears to still be in check.
BABY, YOU CAN BUY MY CAR COMPANY: General Motors jumped $1.69, or 4.8 percent, to $37.21 following news that France’s PSA Group, maker of Peugeot and Citroen cars, is exploring a deal to buy Opel, GM’s money-losing European business.
MAJOR LASERS: Cynosure, which makes devices used in laser body contouring, hair removal and skin care, soared after agreeing to be bought by medical device maker Hologic. Hologic will pay $66 a share, or $1.57 billion, for Cynosure, which had about $434 million in revenue last year.
Cynosure jumped $14.43, or 28 percent, to $65.93 while Hologic fell $1.52, or 3.8 percent, to $38.51.
It’s the second straight day where a health care giant agreed to buy a laser aesthetics company. Allergan agreed on Monday to buy Zeltiq Aesthetics, CoolSculpting system helps people reduce bulges of fat, for $2.48 billion.
GLOBAL MARKETS: Stocks were relatively steady across the world. In Europe, the German DAX index was virtually flat, while the French CAC 40 rose 0.2 percent and the British FTSE 100 edged down by 0.l1 percent. In Asia, the Hang Seng index in Hong Kong was close to flat, while the South Korean Kospi index dipped 0.2 percent and the Japanese Nikkei 225 index fell 1.1 percent.
COMMODITIES: Benchmark U.S. crude oil rose 11 cents to $53.04 per barrel. Brent crude, the international standard, rose 33 cents to $55.92 per barrel.
Natural gas fell 4 cents to $2.90 per 1,000 cubic feet. Gold dipped 80 cents to $1,225.00 per ounce, and copper fell 5 cents to $2.73 per pound.
CURRENCIES: The dollar rose to 114.46 Japanese yen from 113.62 late Monday. The euro rose to $1.0616 from $1.0600, and the British pound dipped to $1.2454 from $1.2529.
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