Banks raise S & P, Dow; Nasdaq weighed by Microsoft

(Reuters) – The S & P 500 and the Dow Jones Industrials Average advanced on Wednesday, helped by upbeat housing data and a gain for bank stocks thanks to higher yields, while the Nasdaq was hurt by a fall of Microsoft.

The 10-year US Treasury reference rate US10YT = RR fell back above the symbolic 3% mark on Tuesday and reached its highest level in four months on Wednesday, while US2YT = RR rates reached 2.8 % in ten years.

Increases in market interest rates tend to stimulate banks and the S & P .SPSY financial sector grew by 1.64%, thanks to a 2.6% increase in the shares of JPMorgan & Chase (JPM.N). The KBW .BKX banking index rose by 1.90%.

The data also showed that US homebuilding had increased more than expected in August.

When yields are high, investors tend to favor bonds over defensive sectors such as utilities, consumer staples and real estate, which promise high dividends.

"The yield curve seems to hold steady at a 10-year rate above 3%, which bodes well for the financial group and the economic stability of investors," said Terry Sandven, equity strategist at US Bank Wealth Management in Minneapolis.

The Dow Industrials .DJI was about 0.6 percent of a new record after hitting its highest since Jan. 29.

The .SPLRCT technology sector fell by 0.50%, driven by a 1.9% decline in Microsoft (MSFT.O) and a 0.2% decrease in Apple's shares (AAPL.O).

Microsoft on Tuesday raised its quarterly dividend by about 10 percent, but Morgan Stanley said the increase was less than the company's 12-month operating profit growth.

Five of the top 11 sectors of S & P were higher. The Dow Industrials .DJI was boosted by a 2.5% gain on Caterpillar (CAT.N) and 1.7 percent of Boeing (PROHIBIT).

But utilities .SPLRCU fell 1.71%, the highest among the top 11 sectors of S & P.

At 12:49 ET the Dow Jones Industrial Average rose 191.94 points, or 0.73%, to 26,438.90, the S & P 500 .SPX was up 2.79 points, or 0.10%, to 2,907.10 and the Nasdaq Composite .IXIC was down 31.21. points, or 0.39%, at 7,924.90.

Trade between China and the United States continues to weigh on the minds of analysts and investors, but the general conclusion of the exchange of blows this week is that China may run out of options, given her

"We are not currently escalating trade, we are at the status quo," said Art Hogan, chief market strategist at B. Riley FBR in New York.

Goldman Sachs (GS.N) rose 2.5% after Reuters announced that the company was in advanced talks with several financial companies to launch its application, which sells complex financial products to retail investors.

Copart Inc (CPRT.O) fell 16.5%, the highest rate on the S & P, after the online vehicle auction company failed to meet earnings expectations.

Falling issues outnumbered advances for a ratio of 1.11 to 1 on the NYSE and a ratio of 1.09 to 1 on the Nasdaq.

The S & P index posted 31 new highs of 52 weeks and no new lows, while the Nasdaq recorded 44 new highs and 38 new lows.