By Riva Gold and Aaron Kuriloff
U.S. stocks stabilized Wednesday as government bonds weakened ahead of the Thanksgiving holiday.
The Dow Jones Industrial Average gained 24 points, or 0.1%, at 19047, a day after closing above 19000 for the first time in history. The S&P 500 slipped 0.2% and the Nasdaq Composite lost 0.5%.
The moves come after the blue chip index, S&P 500, Nasdaq and Russell 2000 all closed at record highs on Tuesday for a second day in a row, spurred by a recent uptick in corporate earnings, a jump in oil prices and hopes that the election of Donald Trump would lead to higher growth and inflation.
Many expect the gains to hold in the coming weeks.
"This is relief," said Shannon Saccocia, head of asset allocation at Boston Private Wealth. "We have positive earnings posted, an energy market which has stabilized, and we'll have fiscal spending that will benefit parts of the market that have lagged," she said.
Shares of pharmaceutical companies fell after an experimental Eli Lilly & Co. drug failed to significantly help Alzheimer's patients in a clinical trial, reviving concerns about the course of efforts to develop treatments for the disease. Lilly shares fell 13%. Biogen and Merck & Co., which are also developing similar drugs, lost 5.2% and 1.1% respectively.
Fresh selling swept government bond markets, after new signs of strength in the U.S. economy and a report suggesting the European Central Bank could step up lending of its bond holdings.
Yields on the benchmark 10-year Treasury note rose to 2.412%, according to Tradeweb, from 2.319% Tuesday after the Commerce Department said orders for long-lasting durable goods rose in October at the fastest pace in a year, a signal the U.S. factory sector has begun to stabilize. Yields rise as prices fall.
European government bonds had already sold off after a news report the ECB could lend out more of its large stockpile of government bonds to provide more collateral for short-term lending between financial institutions.
The 10-year German bund yield rose to 0.259% from 0.231% Tuesday, while the 10-year U.K. bond yield climbed to 1.448% from 1.291%, according to Tradeweb.
The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose 0.7%, on pace for its highest close since October 2002. The gains came as expectations have grown for higher inflation and higher U.S. interest rates.
Later Wednesday, the Federal Reserve willrelease minutes from its November meeting, when it decided to keep rates on hold. The course of interest rates in 2017 will be crucial for the performance of the bond market as well as stocks in the coming years, investors say.
"The pace of appreciation of the U.S. dollar over the last two weeks has been pretty quick and pretty sharp," said Christophe Foliot, head of international equities at Edmond de Rothschild Asset Management.
While the overall moves in the S&P 500 have been small, "there's a big change in market leadership," he added. After a rough start to the year, the S&P 500 financials sector has risen over 13% in the past month, while the industrial sector has added over 8%. Shares of utilities companies have fallen more than 3% after an earlier outperformance.
Mr. Foliot is favoring more domestically oriented U.S. stocks in his portfolios, which he says are likely to benefit more from tax cuts and a growing U.S. economy. They are also less likely to suffer than multinationals if the dollar continues to strengthen or if Mr. Trump enacts protectionist policies, he said.
The Stoxx Europe 600 fell less than 0.1% and the British pound rose less than 0.1% against the dollar to $1.2423 as investors analyzed the U.K.'s Autumn Statement, revealing the government's tax and spending plans after the June referendum on European Union membership.
U.K. Treasury chief Philip Hammond said he would aim to close the budget deficit as soon as possible, but not by 2020, and set out plans for infrastructure spending to support the economy.
The U.K. economy will grow more slowly over the next few years than was forecast before the referendum, Mr. Hammond said.
For European equities to pick up, "you need foreign investors coming back to Europe and more clarity on political issues, which can't happen before Dec. 4," said Mr. Foliot, referring to the date ofa coming referendum on constitutional reform.
Earlier, stocks in Australia and South Korea followed Wall Street higher, while markets in Hong Kong and Shanghai struggled for traction after three days of gains. Markets in Japan were closed for a holiday.
Investors also continued to keep an eye on the price of oil ahead of a meeting of the Organization of the Petroleum Exporting Countries next week. U.S. crude was little changed $48.04 a barrel.
--Sam Goldfarb contributed to this article.
Write to Riva Gold at email@example.com and Aaron Kuriloff at firstname.lastname@example.org
(END) Dow Jones Newswires
November 23, 2016 12:35 ET (17:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.