Investors closed out the trading week on Friday with markets little changed on the day but pulled in several directions over the past five sessions.
The S&P 500 added 0.17% to close at 7,650.50, and the Nasdaq Composite gained 0.39% to 26,522.54. The Dow Jones Industrial Average slipped 0.18% to 51,682.64, and lost 1.69% over the week, the index's weakest stretch in some time. The split reflects a market trying to digest two big pieces of news this week: the Federal Reserve's rate hike on Wednesday, and a continued climb in bond yields that has made borrowing more expensive across the economy.
The benchmark 10-year Treasury yield touched 4.998%, just shy of the psychologically significant 5% mark it briefly crossed earlier in the week for the first time since before the 2008 financial crisis. Higher yields tend to make stocks, especially fast-growing technology companies, less attractive by comparison, and they also raise the cost of mortgages, car loans and business borrowing. The U.S. dollar index rose 1.1% over the week, even though it slipped slightly on Friday itself to 100.215, as investors bet that higher American interest rates would keep drawing money into dollar assets. Gold, often a haven when rates and uncertainty are both rising, gained 0.77% on the day to $4,380.01 an ounce, while silver rose 1.41% to $66.35.
European markets had a rougher week: the Euro Stoxx 50 fell 1.37%, Germany's DAX dropped 1.60%, and France's CAC 40 slid 1.49%, as the same global rate pressures weighed on shares there. Asian markets, by contrast, mostly rose, even after the Bank of Japan's own rate increase this week. The week ahead looks busy for global investors, with China's loan prime rate decision due Monday, minutes from Brazil's central bank meeting on Tuesday, flash purchasing managers surveys from major economies on Wednesday, and a rate decision from Mexico's central bank on Thursday.
Traders will be watching whether the 10-year Treasury yield breaks decisively above 5%, a level last sustained before the 2008 financial crisis, and how central banks in Brazil, Mexico and elsewhere respond to the stronger dollar.
Why do rising bond yields matter to ordinary people?
Higher Treasury yields tend to push up the cost of mortgages, auto loans and credit cards, since many consumer and business borrowing rates are priced off them.
What is coming up next week for markets?
Investors are watching China's loan prime rate decision, Brazil's central bank minutes, flash PMI data, and a Mexican central bank rate decision.