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Falling tech stocks weigh on US indexes; bond yields ease

NEW YORK _ Falling technology stocks pulled U.S. indexes back from the edge of record highs on Friday, and bond yields gave up some of their big gains from the last few days.

KEEPING SCORE: The Standard & Poor’s 500 index fell 6 points, or 0.3 per cent, to 2,256 as of 1:30 p.m. Eastern time. The Dow Jones industrial average dipped 26 points, or 0.1 per cent, to 19,826. The Nasdaq composite fell 21, or 0.4 per cent, to 5,436. All three indexes remain within 1 per cent of their record highs.

TECHNOLOGY STRUGGLES: Tech stocks in the S&P 500 fell 0.9 per cent, the worst performance among the 11 sectors that make up the index. Tech giant Oracle was one of the biggest decliners in the index. It fell $1.89, or 4.6 per cent, to $38.97 after reporting revenue for its latest quarter that fell short of analysts’ expectations.

BOND YIELDS EASE: The yield on the 10-year Treasury fell to 2.56 per cent from 2.60 per cent late Thursday, putting at least a temporary halt to its strong rally since last month’s presidential election.

Bond yields had been jumping since Donald Trump’s surprise victory on expectations that faster economic growth and inflation may be on the way. The 10-year Treasury yield was at 1.86 per cent on election day.

Yields kept rising this week after the Federal Reserve raised interest rates for only the second time in a decade and said that three more increases may be on the way in 2017.

The two-year Treasury yield fell to 1.24 per cent Friday from 1.28 per cent late Thursday, pulling back from its highest level since the summer of 2009.

DIVIDEND REBOUND: The dip in bond yields helped to halt the weekslong slide for high-dividend stocks, at least temporarily. Utilities, real-estate stocks and telecoms have struggled on worries that higher yields will cause income investors to abandon them in favour of bonds.

Utility stocks rose 1.3 per cent, the most among the 11 sectors that make up the S&P 500. Real-estate stocks rose 1.2 per cent.

CHECK THE PRICE TAG: Big gains since last month’s election mean stocks are looking pricier relative to their earnings, a key way that investors measure whether the market is too expensive.

The Standard & Poor’s 500 index is trading at roughly 19 times its earnings per share over the last 12 months, according to FactSet. That compares with its average price-earnings ratio of 15.6 times over the last 15 years and is an indication that stocks are, if not expensive, no longer cheap. And that, in turn, implies lower future returns than the big gains investors have enjoyed since the Great Recession’s end.

“I do think we’re in a low-return environment,” says Bernie Williams, chief investment officer for USAA’s Wealth Management Investment Solutions. “Of course, we thought that at the start of this year, too, and here we are up 10 per cent.”

JUMPING JABIL: Jabil Circuit rose $3.32, or 15.4 per cent, to $24.89 after reporting stronger earnings for its latest quarter than analysts expected.

BURRITO BOARD: Chipotle Mexican Grill jumped $8.05, or 2.1 per cent, to $390.40 after the company announced a shake-up of its board. Four new directors will join the board, as part of an agreement with activist investor Bill Ackman’s Pershing Square.

MARKETS ABROAD: In Europe, Germany’s DAX rose 0.3 per cent, France’s CAC 40 rose 0.3 per cent and Britain’s FTSE 100 rose 0.2 per cent. In Asia, Japan’s Nikkei 225 gained 0.7 per cent, South Korea’s Kospi rose 0.3 per cent and Hong Kong’s Hang Seng fell 0.2 per cent.

COMMODITIES: Crude oil rose 86 cents, or 1.7 per cent, to $51.76 per barrel in New York. Brent crude, the international standard, rose $1.15 cents to $55.17 a barrel in London. Gold recovered a bit after falling to its lowest price in 10 months on Thursday. It rose $7.70, or 0.7 per cent, to $1,137.50 per ounce. Silver rose 1.5 per cent, and copper fell 1.5 per cent.

DOLLAR: The dollar’s recent ascent against other currencies stalled. The euro rose to $1.0455 from $1.0424 after hitting its weakest level against the dollar since early 2003 on Thursday. The dollar dipped to 117.76 Japanese yen from 117.93 late Thursday.

The dollar had been on a mostly upward trend against other currencies since 2014, a result of the U.S. economy’s comparative strength over others around the world. The dollar’s rise accelerated after the Fed’s move on Wednesday.