World stocks rise as bond yields buoy financials; oil drops

A broad index of stocks around the world rose on Thursday as financial shares helped Wall Street’s benchmark index advance, while oil prices fell on a forecast for weaker demand.

The U.S. benchmark S&P 500 stock index notched a record closing high just shy of the 3,000 mark as financial shares were boosted by a jump in bond yields following soft demand in an auction of $16 billion in 30-year Treasuries.

A fall in biotech and pharmaceutical shares pulled down the Nasdaq, however, as the administration of U.S. President Donald Trump withdrew a rule that would have required health insurers to pass on rebates from drugmakers.

But the withdrawal of the rule benefited shares of insurers, including UnitedHealth Group Inc, which boosted the Dow Jones Industrial Average above the 27,000 mark for the first time.

MSCI’s gauge of global stocks gained 0.24% as U.S. stocks mostly moved higher.

“Financial stocks are fine today as we’re getting ready to enter the earnings season for banking,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia. “The 30-year Treasury auction is steepening the (yield) curve a bit.”

“The pharma space is having a bad day,” he added. “The market would be quite a bit higher if it weren’t for that.”

Oil prices retreated from early gains after the Organization of the Petroleum Exporting Countries forecast less demand for its crude next year. Earlier in the session, they had hit their highest levels in more than a month.

U.S. crude futures settled 23 cents lower, or 0.38%, at $60.20 a barrel. Brent crude futures settled down 49 cents, or 0.73%, at $66.52 a barrel.

On Wall Street, the Dow Jones Industrial Average rose 227.88 points, or 0.85%, to 27,088.08, the S&P 500 gained 6.84 points, or 0.23%, to 2,999.91 and the Nasdaq Composite dropped 6.49 points, or 0.08%, to 8,196.04.

U.S. shares had previously hit record highs after Federal Reserve Chairman Jerome Powell confirmed the U.S. central bank stood ready to “act as appropriate” in response to risks to the U.S. economy, including disappointing factory activity, tame inflation and a simmering trade war with China.

Powell spoke before the Senate Banking Committee on Thursday following similar testimony before the House of Representatives Financial Services Committee on Wednesday.

“The Fed news is baked into the market now. The next big news is earnings,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

U.S. corporate earnings season begins in earnest next week, with large banks such as Citigroup Inc and JPMorgan Chase & Co reporting results.

In fixed-income markets, benchmark 10-year U.S. Treasury notes last fell 22/32 in price to yield 2.1361%, from 2.061% late on Wednesday.

Data showing the biggest gain in U.S. underlying consumer prices in 1-1/2 years also contributed to gains in Treasury yields. The data did not change expectations for a rate cut from the Fed, however.