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Gains for bank stocks help lead major US indexes higher

Business

A school group walks by the New York Stock Exchange, Tuesday, Feb. 23, 2021. Major indexes are off to a mixed start on Wall Street as gains for banks and industrial companies are offset by losses in Big Tech stocks like Apple and Amazon. The S&P 500 was down 0.2% in the first few minutes of trading Wednesday, a day after it narrowly managed to break a five-day losing streak. (AP Photo/Mark Lennihan)
By DAMIAN J. TROISE AP Business Writer

Stocks shook off a weak start and moved steadily higher in afternoon trading on Wall Street as gains for banks offset losses in Big Tech companies.

Bank stocks benefited from another upward move in long-term interest rates in the bond market, which will allow them to charge higher rates on mortgages and other loans, increasing their profits. JPMorgan Chase rose 1.9% and Bank of America added 2.1%.

The S&P 500 index was up 0.9% as of 1:20 p.m. Eastern, after being down as much as 0.6% earlier. The Dow Jones Industrial Average rose 338 points, or 1.1% to 31,875 and the technology-heavy Nasdaq Composite was up 0.6%.

The Russell 2000, which tracks smaller companies, continued to outpace the rest of the market, as it has since the beginning of the year. That’s a sign investors are feeling more confident about economic growth. The index rose 2.1%.

Treasury yields continued to climb, adding to a multi-week increase in rates that are used as benchmarks for many kinds of loans including corporate debt and 30-year mortgages. The yield on the 10-year Treasury note rose to 1.38%, the highest level in just over a year.

The rise in bond yields has several implications for both the stock market and overall economy. Higher yields make stocks with lofty valuations less attractive. Those tend to be technology companies, who are priced typically for growth and not for a steady return of dividends like mature companies like makers of consumer staples, utilities and real estate.

Apple fell 1.2% and Amazon fell 1.3%. Those and other Big Tech companies rocketed in 2020 as investors bet that the pandemic would cause Americans to shift shopping habits and buy gadgets to keep themselves occupied in pandemic quarantines.

The bond market could also be a harbinger for inflation, something that has been nonexistent in the U.S. for the better part of a decade.

Federal Reserve Chair Jerome Powell told Congress on Wednesday that the central bank will not begin raising interest rates until it believes it has reached its goals on maximum employment and inflation.

As he did before the Senate Banking Committee on Tuesday, Powell told the House Financial Services Committee that the Fed was in no hurry to raise benchmark short-term interest rates or to begin trimming its $120 billion in monthly bond purchases used to put downward pressure on longer-term rates.

Powell said the Fed did not see any indication that inflation could race out of control. While price increases might accelerate in coming months, Powell said those increases were expected to be temporary and not a sign of long-run inflation threats.

Investors are still anticipating another round of stimulus to help boost the economy. The U.S. House of Representatives is likely to vote on President Biden’s proposed stimulus package by the end of the week. It would include $1,400 checks to most Americans.
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AP Economics Writer Martin Crutsinger contributed.