Cyclical Stocks Climb to Power Dow

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The Dow Jones Industrial Average inched higher Monday, led by advances in shares of manufacturers and consumer companies.

The blue-chip index rose 143 points, or 0.4%, to 32921 shortly after the opening bell, adding to gains after finishing last week at a record. The S&P 500 fell less than 0.1%, and the Nasdaq Composite declined 0.2%.

Shares of economically sensitive companies have led the stock market higher this month, a trend investors have attributed to bets that growth and inflation will pick up. The vaccine rollout has proceeded faster than expected, making investors more optimistic about the outlook for the second half of the year. Congress has also passed an additional $1.9 trillion in fiscal stimulus to help boost the economy.

“With the reopening of the economy, this fiscal stimulus in the form of checks will have a stronger impact on consumption,” said Carsten Brzeski, ING Groep’s global head of macro research.

That is important because consumer spending accounts for more than two-thirds of U.S. economic output, he added.

Later this week, investors will parse the Federal Reserve’s monetary policy statement for further guidance on policy makers’ views on rising bond yields and inflation prospects.

“The fear factor has now gone away, so markets are now finding an equilibrium. Bond yields will go higher, but central banks are not backing down,” Mr. Brzeski said. “The Fed meeting will clearly be crucial and essential in terms of further educating markets as to what the Fed is up to.”

Cyclical stocks helped the Dow outpace the S&P 500 and Nasdaq early Monday.

Boeing shares rose 2.3%, while 3M added 1%.

Meanwhile, shares of Caesars Entertainment climbed 2.9%. S&P Dow Jones Indices said late Friday that the casino operator would be added to the S&P 500 effective March 22.

Government bonds strengthened, with the yield on the 10-year U.S. Treasury note ticking lower to 1.620%. It ended Friday at 1.634%, the highest since Feb. 6, 2020. Yields fall as bond prices rise.

Some money managers are worried that the large fiscal package could lead to sharply higher inflation, and for a prolonged period, forcing the Fed to boost interest rates sooner than policy makers have suggested they would.

“The Fed needs to send a message here that it is still mindful of the substantial progress that is required before the economy is returned to pre-pandemic conditions, but equally, it’s not going to be too forceful because some of these moves are warranted based on fundamentals,” said James Ashley, head of international market strategy at Goldman Sachs Asset Management. “So it is, how do you calibrate that message in a way that is neither too dovish or too hawkish.”

Over the weekend, bitcoin crossed $60,000 for the first time. On Monday, it fell back to trade near $55,810.67.

Overseas, the pan-continental Stoxx Europe 600 rose 0.2%.

Major equity benchmarks in Asia ended the day on a mixed note. The Shanghai Composite Index fell almost 1% and South Korea’s Kospi closed 0.3% lower. Japan’s Nikkei 225 rose 0.2% and Hong Kong’s Hang Seng Index gained 0.3%.

The stock market last week resumed its rally.

Photo: Nicole Pereira/Associated Press

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Akane Otani at akane.otani@wsj.com

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