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Spike in Bond Yields Upends Stock Rally02/21 16:05

   U.S. stocks closed broadly lower Wednesday, erasing an early gain, as 
investors reacted to a late-afternoon surge in bond yields.

   (AP) -- U.S. stocks closed broadly lower Wednesday, erasing an early gain, 
as investors reacted to a late-afternoon surge in bond yields.

   Bond yields climbed to their highest level in four years after the Federal 
Reserve released minutes from its latest policy meeting. The minutes showed 
bullish sentiment among policymakers, confirming their intention to raise 
interest rates this year.

   The yield on the 10-year Treasury note rose sharply after the minutes came 
out, touching 2.95 percent, its highest level since January 2014. Higher bond 
yields indicate investors expect more risk of inflation. They also can threaten 
stock prices by making bonds more appealing versus stocks.

   "We're moving back to normal volatility, we're moving back toward normal 
interest rates, normal inflation," said Erik Davidson, chief investment officer 
for Wells Fargo Private Bank. "This is what normal looks like."

   The Standard & Poor's 500 index fell 14.93 points, or 0.6 percent, to 
2,701.33. The Dow Jones industrial average lost 166.97 points, or 0.7 percent, 
to 24,797.78. The blue chip average had been 300 points higher before the 
late-afternoon slide.

   The Nasdaq gave up 16.08 points, or 0.2 percent, to 7,218.23. The Russell 
2000 index of smaller-company stocks shed most of its gains from earlier in the 
day. It inched up 1.84 points, or 0.1 percent, to 1,531.84.

   The major stock indexes started the day on pace to recoup some of the 
market's losses from a day earlier as investors sized up the latest crop of 
company earnings.

   Technology companies, retailers and industrial stocks led the way for much 
of the day. The rally kicked into a higher gear shortly after the Fed minutes 

   Traders appeared to initially welcome the details in the meeting minutes, 
which show that a majority of Fed officials at the meeting believed that 
improving global economic prospects and the effects of recently passed tax cuts 
had raised the prospect for solid economic growth and for continued interest 
rate increases in 2018.

   The Fed did not raise rates at the January meeting, which occurred before 
the February stock market plunge and turbulence.

   Then bond yields began to climb, and the stock market rally began to 
evaporate. For a while, bank shares jumped in response to the rise in bond 
yields, which can benefit banks by allowing them to charge higher interest 
rates on loans. But soon banks stocks also slid into the red.

   The yield on the 10-year Treasury, which is used as a benchmark for 
mortgages and other loans, has been rising in recent months from a recent low 
of 2.04 percent in September.

   The pickup in yields has begun to make bonds more attractive as an 
alternative to stocks, which makes some investors uneasy.

   Despite the broader market slide, investors bid up shares in some companies 
that reported better-than-expected earnings or outlooks Wednesday.

   Advance Auto Parts vaulted 8.2 percent after reporting better earnings than 
analysts were expecting. The stock was the biggest gainer in the S&P 500, 
adding $8.65 to $114. Shares in rival auto parts retailer AutoZone also rose, 
climbing $6.26, or 0.9 percent, to $719.49.

   La-Z-Boy also got a lift from its latest quarterly report card, rising 
$2.85, or 9.9 percent, to $31.75.

   Walmart shares continued to slide Wednesday, a day after posting its biggest 
single-day drop in 30 years. The stock lost $2.59, or 2.8 percent, to $91.52.

   Devon Energy slid 11.8 percent after the energy company disclosed a 
smaller-than-expected profit and 2018 forecast that raised concerns with 
analysts. The stock gave up $4.08 to $30.57.

   Benchmark U.S. crude fell 11 cents to settle at $61.68 per barrel in New 
York. Brent crude, used to price international oils, rose 17 cents to close at 
$65.42 per barrel in London.

   In other energy futures trading, heating oil was little changed at $1.93 a 
gallon. Wholesale gasoline added a penny to $1.76 a gallon. Natural gas rose 4 
cents to $2.66 per 1,000 cubic feet.

   The dollar rose to 107.78 yen from 107.30 yen on Tuesday. The euro weakened 
to $1.2300 from $1.2336.

   Gold rose 90 cents to $1,332.10 an ounce. Silver added 18 cents to $16.62 an 
ounce. Copper gained 3 cents to $3.22 a pound.

   Major indexes in Europe ended mostly higher. Germany's DAX slipped 0.1 
percent, while France's CAC 40 rose 0.2 percent and Britain's FTSE 100 added 
0.5 percent.

   In Asia, Japan's Nikkei 225 index climbed 0.2 percent and Hong Kong's Hang 
Seng gained 1.8 percent. Australia's S&P ASX 200 edged 0.1 percent higher. The 
Kospi in South Korea added 0.6 percent. India's Sensex gained 0.3 percent. 
Shares in Southeast Asia were mixed.


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