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Jan 19, 2:33 PM EST

Dow erases gain for 2017 as stocks fall, bond yields climb


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AP Photo/Mark Lennihan

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NEW YORK (AP) -- The Dow Jones industrial average erased its gain for the year on Thursday, part of a pullback for stock indexes as Treasury yields continued their upward march.

KEEPING SCORE: The Dow Jones industrial average fell 109 points, or 0.6 percent to 19,696 as of 2:20 p.m. Eastern time. That puts the Dow down 0.3 percent for the year, though it's still within a good day or so of its record high, which was set in December.

The Standard & Poor's 500 index fell 11 points, or 0.5 percent, to 2,260. The Nasdaq composite fell 23 points, or 0.4 percent, to 5,533.

Four stocks fell for every one that rose on the New York Stock Exchange.

WALKING A TIGHTROPE: Stocks have slowed in 2017 following an electrifying jump higher since Election Day. Investors are waiting to see what a Donald Trump presidency will really mean for stocks. They've already seen the optimistic case, as shown in the nearly 6 percent jump for the S&P 500 since Donald Trump's surprise victory of the White House, propelled by expectations for lower taxes and less regulation on businesses.

But on the possible downside, increased tariffs or trade restrictions could mean drops in profits for big U.S. companies.

"The stock market seems to be perched like a tightrope walker, balanced on the center, but there are a couple hundred-pound weights on each end of the balancing pole," says Rich Weiss, senior portfolio manager at American Century.

Even with all those uncertainties, the market has remained relatively calm. The S&P 500 hasn't had a day where it's swung by 1 percent, either up or down, since early December. And the VIX index, which professional investors use to measure nervousness of the market, is still about 50 percent lower than where it was a year ago. "Irrational complacency," Weiss says.

YIELDS UP: Bond yields continued their march higher, and the 10-year Treasury yield rose to 2.47 percent from 2.43 percent late Wednesday. Yields have generally been climbing since Election Day on expectations that President-elect Donald Trump's policies will spur more inflation and economic growth. The 10-year yield is still below its perch above 2.60 percent that it reached in mid-December, but it's well above the 2.09 percent yield it was at a year ago.

Reports have shown that the U.S. economy has been improving recently, and the latest on Thursday showed encouraging signs for the housing and labor markets.

The fewest number of workers sought unemployment claims last week in 43 years, a sign that corporate layoffs are subsiding.

A separate report showed that homebuilders broke ground on more new homes in December, capping a solid 2016 for the industry. Developers began work on the most new homes and apartments since 2007.

A stronger economy could sway the Federal Reserve to raise interest rates more quickly. It has raised rates twice since 2015 after keeping them at record lows near zero since 2008.

DIVIDEND DROPS: Higher yields may lure income investors back to bonds and away from high-dividend stocks. That hurts real-estate investment trusts and utilities, which carry some of the biggest dividend yields. REITs and utilities in the S&P 500 each fell 1.1 percent, tied for the biggest loss of the 11 sectors that make up the index.

RAIL RALLY: Railroad operators posted some of the biggest gains. CSX led the way with a jump of $7.50, or 20.3 percent, to $44.39. An activist investor is reportedly teaming up with the executive who turned around Canadian Pacific Railway to target CSX.

Union Pacific rose $2.16, or 2.1 percent, to $105.93 after reporting stronger fourth-quarter earnings than expected.

BINGE BUYING: Netflix jumped $6.07, or 4.5 percent, to $139.33 after the video-streaming service reported stronger fourth-quarter earnings than analysts expected and said that it added more customers during the quarter than ever before.

CURRENCIES: The dollar was mixed against its major rivals. It rose to 115.07 Japanese yen from 113.74 late Wednesday, and the euro dipped to $1.0661. But the British pound rose to $1.2313 from $1.2284.

MARKETS ABROAD: In Asia, the Japanese Nikkei 225 index rose 0.9 percent, South Korea's Kospi rose 0.1 percent and Hong Kong's Hang Seng fell 0.2 percent.

In Europe, the German DAX was virtually flat, the French CAC 40 fell 0.3 percent and the FTSE 100 lost 0.5 percent in London.

COMMODITIES: Benchmark U.S. crude oil rose 29 cents to close at $51.37 a barrel. Brent oil, the international standard, rose 25 cents to $54.17. Natural gas rose 7 cents to $3.37 per 1,000 cubic feet.

Gold dropped $10 to $1,202.10 an ounce, silver fell 27 cents to $17 an ounce and copper was down a penny at $2.61 a pound.

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AP Business Writer Elaine Kurtenbach contributed to this report from Tokyo.

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