A rally on Wall Street sent the Dow Jones Industrial Average above 27,000 for the first time Thursday, with the blue-chip stock index closing at 27,088.
The S&P 500-stock index edged lower, erasing gains Thursday that had briefly propelled the benchmark index above 3,000 for the second day in a row. The tech-heavy Nasdaq composite also turned red, pulling below its record closing high from a day earlier.
Bond yields surged, making traditionally high-yielding sectors such as utilities and real estate stocks less attractive. The yield on the 10-year Treasury note climbed to 2.13% from 2.06% late Wednesday.
The spike in bond yields helped drive bank stocks higher. When bond yields rise, they push up interest rates on mortgages and other loans, making them more profitable for lenders. Bank of America rose 1.5% and Goldman Sachs gained 2.5%.
The market has been trending mostly higher this week as investors grew more confident that the Federal Reserve may cut interest rates for the first time in a decade as soon as the end of this month.
On Wednesday, Fed Chairman Jerome Powell said that many Fed officials believe a weakening global economy and rising trade tensions have strengthened the case for a rate cut. The remarks came as Powell gave testimony before the House Financial Services Committee.
New data showing consumer prices rose in June from a year earlier wasn't expected to give the Fed reason to reconsider whether it should lower rates, if necessary. Inflation has remained muted through much of the economy's 10 year expansion, which Powell has said cited as a justification for potentially lowering rates.
"With the markets at 27,000 on the Dow and [near] 3,000 on the S&P, they're baking in that a deal gets done with China, that the Fed cuts rates and remains dovish, and then [corporate] earnings and guidance come in better than expected," said Sean Lynch, managing director of equities at Wells Fargo Private Bank. "We get a hiccup in any one of those, you'll see a little bit of a pullback in the market."
Corporate earnings will keep investors busy starting next week, when S&P 500 companies begin reporting results for the April-June quarter.
Companies have been lowering expectations for how much profit they made in the quarter. Wall Street now projects that overall S&P 500 company earnings for the quarter fell 2.6% from a year earlier, according to FactSet. As recently as the end of March, earnings were forecast to be down only 0.5%.
This could be the first time in three years that S&P 500 companies report a back-to-back decline in overall earnings.