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Dow, up triple digits, crosses the 20,600 mark

Joe McDonald
AP Business Writer
This file photo taken on Nov. 9, 2016 shows a broker pictured at the stock exchange in Frankfurt, Germany, as the Tv screens shows the results of presidential elections in the U.S.

NEW YORK — Stocks jumped to new record highs and the Dow shot past 20,600 on Wednesday after more reports showed the U.S. economy continues to strengthen.

The Dow Jones industrial average climbed 107 points, up 0.5% to a new closing high of 20,611.86.

Also building upon their record highs set in the previous session were the S&P 500 and Nasdaq composite, up 0.5% to 2349.25 and 0.6% to 5819.44, respectively.

The encouraging data could push the Federal Reserve to raise interest rates more aggressively from the record lows marked during the Great Recession.

Wednesday’s economic reports give the Federal Reserve more encouragement to raise interest rates, and economists said the possibility is increasing that it may happen at the central bank’s next meeting in March. Retailers had stronger sales in January than economists expected, and inflation at the consumer level was the highest in years. Consumer prices rose 2.5% in January from a year earlier, the highest rate since March 2012.

Gone shopping: Retail sales surged in January

Consumer prices post biggest rise in nearly 4 years

Fed Chair Janet Yellen said in testimony before a Congressional committee that the strengthening job market and a modest move higher in inflation should warrant continued, gradual increases in interest rates, echoing her comments from a day earlier. The central bank raised rates in December for just the second time in a decade, after keeping rates at nearly zero to help lift the economy out of the Great Recession.

“What really stuck out to me in Yellen’s testimony was her adding emphasis to the idea that as things currently stand, even without fiscal stimulus, it would be prudent to hike sooner rather than later,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. “So if we do see tax cuts or infrastructure spending, they may need to quicken the pace of rate hikes. The bond market has clearly gotten the message.”

Yellen gives no timetable to shrink Fed assets

Treasury yields jumped as investors sold off bonds. The 10-year Treasury yield rose to 2.51% from 2.47% late Tuesday.

When bonds are paying more in interest, it can mean less demand from income investors for stocks that pay big dividends. Utility stocks, which are some of the biggest dividend payers, fell 0.8%, the largest loss among the 11 sectors that make up the S&P 500. Real-estate investment trusts, which are also go-to buys for dividend seekers, were weak as well.

Financial stocks had some of the biggest gains, and those in the S&P 500 rose 0.9%. Banks can benefit from higher interest rates by charging more for loans.

In Europe, the German DAX index rose 0.2%, while the French CAC 40 rose 0.6% and the U.K.’s FTSE 100 added 0.5%. In Asia, Japan’s Nikkei 225 index rose 1%, Hong Kong’s Hang Seng rose 1.2% and the Kospi in South Korea gained 0.4%.

The dollar ticked up to 114.27 Japanese yen from 114.22 yen late Tuesday. The euro edged up to $1.0574 from $1.0572, and the British pound dipped to $1.2448 from $1.2465.

Benchmark U.S. crude fell nine cents to $53.11 a barrel.

Gold rose $9.30 to $1,234.70 per ounce, silver rose 9 cents to $17.98 per ounce and copper was flat at $2.74 per pound.

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