US Stocks Drift Close to Record Highs

NEW YORK (AP) -- U.S. stocks are drifting close to their record heights Tuesday, while Treasury yields keep marching higher amid expectations that the economy will pull out of its slump after a powerful recovery sweeps the globe later this year.

The S&P 500 was virtually unchanged after the first 15 minutes of trading. The Dow Jones Industrial Average was down 40 points, or 0.1%, at 30,968, as of 9:45 a.m. Eastern time, and the Nasdaq composite was 0.4% higher. Trading was jumbled, and the S&P 500 was nearly evenly split between stocks rising and falling.

Markets have been charging higher recently amid a wave of optimism about the future. The rollout of coronavirus vaccines has Wall Street anticipating a big rebound for the economy and corporate profits as daily life starts to return toward normal later this year. The recent sweep of the White House, Senate and House by Democrats also has raised expectations for another round of stimulus coming for the economy.

But the gains have been so big that critics say stocks and other investments simply look too expensive. Some measures of value are at their priciest levels since 2000, when the dot-com bubble was popping.

Low interest rates and almost nonexistent inflation have been encouraging investors to pay ever-higher stock prices for each $1 of profits that a company produces. But longer-term interest rates have begun to pull sharply higher with expectations for more stimulus, economic growth and possibly inflation in the future. The yield on the 10-year Treasury rose to 1.16% in morning trading, for example. That's up from 1.12% late Monday and from less than 0.90% at the start of the year.

The rise in longer-term interest rates could mean additional pressure on the Federal Reserve, which has been trying to keep interest rates low to jolt the economy out of its pandemic-caused weakness. Besides driving investors away from pricey stocks, higher interest rates can also make borrowing more expensive and hit the housing and other industries particularly hard.

The Fed has held short-term interest rates at a record low of nearly zero and bought all kinds of bonds in its drive to help the economy. Its next policy meeting on interest rates is in two weeks.

And despite all the hopes for the future, the present remains bleak. The pandemic is accelerating around the world, particularly as new and potentially more contagious variants of the coronavirus spread. That helped force U.S. employers to cut more jobs than they added in December, the first month that's happened since the economy was collapsing during the spring.

In Europe, stock markets were modestly lower. The French CAC 40 slipped 0.1%, and the German DAX was virtually flat. The FTSE 100 in London lost 0.6%.

In Asa, markets were mixed. Stocks in Shanghai jumped 2.2%, and Hong Kong's Hang Seng rallied 1.3%. But South Korea's Kospi fell 0.7%, and Japan's Nikkei 225 inched up by 0.1%.