WASHINGTON: U.S. stocks rose and the 10-year Treasury yield hit its highest level of the year as investors stepped up bets on a strengthening U.S. economy.
Bank shares and U.S. government bond yields climbed anew after data on housing, employment and inflation—as well as comments from Federal Reserve Chairwoman Janet Yellen—bolstered expectations that the central bank will raise interest rates next month.
Since last week, investors have been pouring money into financial shares and pulling money out of government bonds, with many expecting Donald Trump’s election would mean a more expansive fiscal policy, higher inflation and ultimately higher U.S. interest rates. Those trades picked up again after stalling Wednesday, when financial shares in the S&P 500 and 10-year U.S. Treasury yields fell for the first time since Nov. 4.
Financials led gains in the S&P 500 on Thursday, rising 1.25%. The yield on the benchmark 10-year Treasury note rose to 2.278%, the highest yield since Dec. 30, from 2.222% on Wednesday. Yields, which rise as prices fall, have surged from 1.867% since the presidential election.
The Dow Jones Industrial Average rose 36 points Thursday, or 0.2%, to 18904. The S&P 500 rose 0.5% and the Nasdaq Composite added 0.7%.
Expectations for an interest-rate increase in December have grown in recent sessions. Fed funds futures, used by investors to bet on central-bank policy, showed a roughly 91% chance of a rate rise at the Fed’s meeting Dec. 13-14, according to CME Group.
In prepared testimony for a congressional hearing Thursday, Ms. Yellen reiterated that an increase in interest rates “could well become appropriate relatively soon.”
Also Thursday, the number of Americans applying for first-time unemployment benefits fell last week to its lowest level since November 1973, the Labor Department said, while U.S. consumer prices increased in October from a year earlier at the fastest rate in two years. The Commerce Department said U.S. housing starts and permits for new construction both rose in October.
