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US Stocks Little Changed

July 13,2016 22:22

The Dow industrials and the S&P 500 broke yearlong droughts to reach new highs this week, a sign that U.S. stocks are relatively appealing even as investors grapple with concerns about the global economy and the shakeout from the U.K.'s vote to exit ...



By

Akane Otani

The rally that sent U.S. indexes to records earlier this week lost momentum Wednesday. The Dow Jones Industrial Average added 31 points, or 0.2%, to 18378. The S&P 500 was flat and the Nasdaq
NDAQ

-0.21
%

Composite Index lost 0.1%. The Dow industrials and the S&P 500 broke yearlong droughts to reach new highs this week, a sign that U.S. stocks are relatively appealing even as investors grapple with concerns about the global economy and the shakeout from the U.K.’s vote to exit the European Union. Trading was choppier on Wednesday, as stocks alternated between slight gains and losses.
“The tone we’re hearing is not so much the desire to be fully exposed to U.S. stocks as much as it is the fear of being underexposed and missing yield,” said Larry Weiss, head of trading at Instinet. “We’re not seeing the most committed effort to going long.” For indexes to keep pushing higher, some said they were waiting for a reversal of bets on havens, or signs of improvement in corporate earnings, which are expected to fall for a fifth consecutive quarter, according to FactSet. “To see how quickly the U.S. market bounced back after Brexit was a bit of a surprise,” said Thomas Wilson, a senior investment manager at Brinker Capital, of stocks’ record-setting streak. Government bond yields, which have fallen in recent weeks as investors sought havens, declined again. Germany on Wednesday became the first eurozone state to sell 10-year debt at a yield below zero. In Switzerland, government bonds through the longest maturity are also yielding less than zero.
The yield on the U.S. 10-year Treasury note fell to 1.468%. Gold prices rose 0.6%. U.S. crude oil fell 4.5% to $44.71 a barrel after federal data showed U.S. inventories of crude oil and refined products at a record high. The drag on oil prices pulled down energy shares in the S&P 500, making it the worst-performing sector with a decline of 1.3%. In the U.K., David Cameron made his last appearance in Parliament as prime minister, leaving Theresa May to take over as the U.K.’s new leader. The British pound, which was in the firing line after the U.K. referendum, declined 0.8% against the U.S. dollar at $1.317. The Stoxx Europe 600 fell 0.1% after fluctuating between gains and losses in earlier trade.
Some investors foresee further uncertainty ahead. “Brexit is still a live risk that markets seem to underestimate,” said Nick D’Onofrio, chief executive of London-based North Asset Management. “It will lead to a slowdown in the U.K., which will spill over to Europe.” The Bank of England meets on Thursday and analysts expect it to lower its benchmark lending rate by a quarter of a percentage point to 0.25% to counter the fallout from the Brexit vote. BOE Gov. Mark Carney has already announced that the central bank was on hand with at least £250 billion ($331.18 billion) in funding for any banks that needed it. The BOE also loosened bank capital requirements to support lending.
Many investors expect other major central banks to also act to counter a potential drag on the global economy after the Brexit vote, with some predicting further stimulus from the European Central Bank and a further delay to the U.S. Federal Reserve’s plans to raise interest rates this year. “Central banks don’t have a choice—if they withdraw their support now, this will be a massive hit to sentiment,” said Eoin Murray, head of investments at Hermès Investment Management.
Stocks in Asia gained, boosted by the Japanese government’s plan to roll out ”bold economic stimulus.” The country’s Nikkei Stock Average rose 0.8%. The Shanghai Composite Index gained 0.4%, and Hong Kong’s Hang Seng
HSNGY

1.26
%

Index rose 0.5%.
Write to Georgi Kantchev at georgi.kantchev@wsj.com

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