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Stocks close mixed: Dow hits new record high as S&P 500, Nasdaq pull back

Joe McDonald
AP Business Writer

Stocks closed mixed Monday as the Dow hit a new all-time high and as oil prices jumped after several non-OPEC countries agreed to join the cartel in cutting output and as investors focused on interest rates. The S&P 500 and Nasdaq snapped 6-day winning streaks and retreated from record highs.

Investors were also focusing on interest rates as Federal Reserve  policymakers meet this week and most economists expect the Fed to announce a rate hike at the conclusion of the 2-day meeting on Wednesday.

The Dow Jones industrial average rose 39.58 points, or 0.2%, to a record close of 19,796.43, according to preliminary calculations. The Standard & Poor's 500 index fell 0.1% to 2256.96,  after rising in early trading to set a new intraday record. The Nasdaq composite index dropped fell 0.6% to 5412.54.

People walk outside of the New York Stock Exchange (NYSE) on Dec. 8, 2016 in New York City.

Energy stocks got a boost as the price of U.S. benchmark crude oil jumped 2.6% to $52.83 a barrel as oil-producing countries outside of OPEC agreed to reduce production by 558,000 barrels per day. That comes after OPEC countries agreed in November to reduce production by 1.2 million barrels per day.

Oil prices jump after non-OPEC accord

The Organization of Petroleum Exporting Countries persuaded 11 non-members to cut oil production, a move aimed at draining a worldwide oil glut and boosting low prices that have squeezed government finances in Russia and Saudi Arabia. Saudi oil minister Khalid Al-Falih said Saturday’s deal would stabilize the market through next year and encourage industry investment. Al-Falih said the deal “is meant to accelerate the natural process of rebalancing” the oil market.

Expectations of higher inflation in the economy, as well as stronger economic growth, have driven bond yields higher since Donald Trump’s surprise victory last month in the U.S. presidential election. Inflation is one of bond investors’ biggest fears, and they’re demanding higher yields in order to compensate for the perceived increase in risk.

The yield on the 10-year Treasury note rose above 2.50% to its highest level since autumn 2014 before settling back at 2.48%, up from 2.47% Friday.

Investors expect Fed governors, meeting Thursday, to raise rates for only the second time in a decade. The Fed has kept rates close to zero since the 2008 global crisis but its leaders have indicated the U.S. economy has strengthened enough to start gradually returning to normal policy. The election of Donald Trump, who has promised tax cuts and higher spending, has raised questions about whether the Fed will delay future moves to see how that plays out. Investors are expected to look at Fed comments on the economic outlook for clues to its next move on rates.

“A quarter-point rate hike looks almost certain,” Jim O’Sullivan of High Frequency Economics said in a report. “The tone of the statement will probably be a more upbeat than last time, but we don’t expect projections to change significantly.”

Likely Fed rate hike highlights economic news

Overseas, European stocks fell as Britain’s FTSE 100 was down 0.9% and Germany’s DAX shed 0.1%. France’s CAC 40  fell 0.1%.

In Asia, the Shanghai Composite Index tumbled 2.5% and Hong Kong’s Hang Seng lost 1.5%. Tokyo’s Nikkei 225 shed 0.9% and Seoul’s Kospi gained 0.1%.

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