By Stephen Culp
NEW YORK (Reuters) - The S&P 500 and the Dow Jones industrial average rose on Wednesday, with the Dow hitting its highest closing level since late January as rising Treasury yields boosted the financial sector and trade worries subsided.
The tech-heavy Nasdaq (.IXIC) ended the session slightly lower.
Financial companies (.SPSY) rose 1.8 percent, the biggest percentage gainer among the major S&P 500 sectors, as the benchmark 10-year Treasury yield hit a four-month high. Goldman Sachs (GS.N), JPMorgan Chase (JPM.N), Citigroup (C.N) and Bank of America (BAC.N) ended the session up between 2.6 and 3.3 percent.
"The sharp rise in the 10-year that you've seen in the last few days and the widening of the yield curve, that has really built the fire under these financials," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. "The high rates have had the opposite effect on interest rate sensitive stocks like utilities."
The Dow Jones Industrial Average (.DJI) rose 158.8 points, or 0.61 percent, to 26,405.76, the S&P 500 (.SPX) gained 3.64 points, or 0.13 percent, to 2,907.95 and the Nasdaq Composite (.IXIC) dropped 6.07 points, or 0.08 percent, to 7,950.04.
Of the 11 major sectors of the S&P 500, seven ended in negative territory.
So-called defensive stocks lost ground as rising yields provided investors with an attractive alternative to higher-risk equities. The utilities sector (.SPLRCU) was the biggest loser, falling 2.1 percent.
The technology sector (.SPLRCT) edged 0.1 percent lower, pulled down by a 1.3 percent decline in Microsoft (MSFT.O). The company raised its quarterly dividend on Tuesday by about 10 percent, but Morgan Stanley said the hike was below the company's 12-month trailing operating income growth.
Amazon.com (AMZN.O) slid 0.8 percent as European Union regulators looked into whether the largest online retailer was using merchant data to stifle competition.
Among the other components of the FAANG group of stocks, Netflix (NFLX.O) was also down slightly. Facebook Inc (FB.O) rose 1.7 percent, while Apple Inc (AAPL.O) and Google parent Alphabet Inc (GOOGL.O) had nominal gains.
In the latest round of tit-for-tat exchanges in the trade dispute between the United States and China, Premier Li Keqiang dismissed talk that Beijing is deliberately weakening its currency to bolster exports.
But trade worries appeared to be easing. "The direct impact of the latest round of tariffs on the economy is likely to be minimal," wrote Bank of America Merrill Lynch in a research report.
"There may be some tariff fatigue," Hellwig said. "The worry factor that investors had early in this negotiation process seems to have waned a little bit."
"China is running out of bullets," he added.
Declining issues outnumbered advancing ones on the NYSE by a 1.17-to-1 ratio; on Nasdaq, a 1.17-to-1 ratio favoured decliners.
The S&P 500 posted 32 new 52-week highs and no new lows; the Nasdaq Composite recorded 53 new highs and 58 new lows.
Volume on U.S. exchanges was 6.52 billion shares, compared to the 6.23 billion average over the last 20 trading days.
(Reporting by Stephen Culp; Editing by Bill Berkrot)