Dow Industrials Rise 0.3% to Close at New High -- Update

By Karen Langley and Caitlin Ostroff

The Dow Jones Industrial Average set a record Wednesday as a strong earnings season continued and fears of rising interest rates eased.

It was the Dow's 22nd record close of 2021 -- tying the number of records the blue-chip index set in all of 2019, according to Dow Jones Market Data. Its next new high will mark the most in a calendar year since 2017 when there were 71.

Stocks have climbed in recent months as the economy heals from the pandemic-induced slowdown and corporate profits beat expectations. The S&P 500 has notched 25 records and gained 11% in 2021.

"It's hard for this market to stay down for any lengthy period of time given the enormity of positive economic data confirmed with tremendous earnings," said Hank Smith, head of investment strategy at Haverford Trust.

The Dow rose 97.31 points, or 0.3%, to 34230.34. The S&P 500 added 2.93 points, or 0.1%, to 4167.59. The tech-heavy Nasdaq Composite, meanwhile, dropped 51.08 points, or 0.4%, to 13582.42, as shares of Microsoft, Amazon.com and Facebook declined.

Recent data from the Commerce Department showed that robust growth in the first quarter returned the U.S. economy to just below its pre-pandemic size.

That acceleration can be seen in company profits. With about three-quarters of S&P 500 companies having reported, earnings are projected to have grown 48% in the first quarter from a year earlier, according to FactSet. That's a big improvement from the 16% growth analysts predicted at the end of December.

If companies continue to deliver strong earnings growth in the coming quarters, it could reassure investors that high stock prices are justified.

Investors credit the Federal Reserve's steps to support the economy with also helping power the stock market rally, and they have watched closely for any sign that the central bank might begin raising interest rates. Wednesday's rally came after Treasury Secretary Janet Yellen walked back comments that interest rates might need to rise to keep the economy from overheating.

She clarified that she was neither predicting nor recommending that the Federal Reserve raise rates. Inflation isn't likely to be a problem, and the Fed can handle it if it does become an issue, she said Tuesday at The Wall Street Journal's CEO Council Summit.

"The macro environment looks good, the monetary environment looks good and the earnings environment looks good," said Jay Jacobs, head of research and strategy at Global X, a provider of exchange-traded funds. "That's really a very powerful trifecta."

Among individual stocks, shares of T-Mobile US climbed $5.65, or 4.4%, to $134.13 after the telecommunications company topped first-quarter revenue and earnings expectations.

General Motors shares rose $2.24, or 4%, to $57.58 after the company said it expects to hit the high end of its estimated 2021 profit range, with strong pricing and brisk new-vehicle demand helping offset the financial impact of a chip shortage.

Shares of Peloton Interactive slid $14.08, or 15%, to $82.62 after the company agreed to recall its treadmills and its CEO apologized for an initial refusal to comply with federal safety regulators.

In bond markets, the yield on the benchmark 10-year U.S. Treasury note edged down to 1.584%, from 1.591% Tuesday. Bond yields fall as prices rise.

Overseas, the pan-continental Stoxx Europe 600 rallied 1.8%. In Hong Kong, the Hang Seng Index fell 0.5%. Markets in Japan, South Korea and mainland China were closed for public holidays.

Write to Karen Langley at [e-mail] and Caitlin Ostroff at [e-mail]

(END) Dow Jones Newswires

05-05-21 1733ET