US stocks edged higher on Friday as banks gained after 10-year US Treasury yields topped 3%, but gains were capped by a drop in the rate-sensitive utilities, real estate and telecom sectors.
Financial stocks rose 0.73%, the most among the 11 major S&P 500 sectors, after the benchmark government yield broke back above the key technical level for the first time since the start of Aug. 2.
Helping drive yields was an upward revision in US retail sales for July, which kept intact expectations of strong economic growth in the third quarter. August sales, however, recorded their smallest gain in six months.
“The rising yields are going to put some pressure on equities, so everybody will focus on treasury markets for direction on equities,” said Tom White, chief market strategist at TradeWise Advisors in Chicago, Illinois.
With yields moving higher, the real estate index fell 1.24% and utilities 0.78%. Telecoms declined 0.75%.
Also weighing on utilities was NiSource, which tumbled 9.1% after fire investigators said they suspected the company’s unit, Columbia Gas, was linked to a series of gas explosions in Boston suburbs on Thursday.
“We’re seeing a back-and-forth movement, which is something we saw throughout the week, (as) valuations are pretty high to begin with,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
“But it’s healthy to have a little bit of a pause and it’s probably welcome.”
At 11:37 am ET the Dow Jones Industrial Average was up 53.92 points, or 0.21%, at 26,199.91. The S&P 500 was up 2.48 points, or 0.09%, at 2,906.66 and the Nasdaq Composite was up 12.23 points, or 0.15%, at 8,025.94.
Energy stocks rose 0.76% as US crude oil prices jumped more than 1%.
The consumer discretionary sector fell 0.18%, weighed down by Walmart, which dropped 0.6% after Goldman Sachs raised questions around the purchase of a majority stake in India’s Flipkart.
L Brands Inc jumped 5.3% after the owner of Victoria’s Secret said it would close all 23 of its Henri Bendel stores and the Henri Bendel e-commerce website in January.
Adobe Systems rose 3.2% after the company topped quarterly revenue and profit expectations.
Advancing issues outnumbered decliners by a 1.18-to-1 ratio on the NYSE and a 1.87-to-1 ratio on the Nasdaq.
The S&P index recorded 42 new 52-week highs and no new lows, while the Nasdaq recorded 92 new highs and 39 new lows.