Dow flirts with 20,000 but Yellen pops it
Global stocks advanced, sending the Dow Jones Industrial Average surging toward 20,000 on speculation that the Federal Reserve’s expected rate increase is a signal of confidence that the world’s largest economy is strengthening. The dollar and Treasuries were little changed.
Intel Corp. and Apple Inc. led gains in the blue-chip index as it capped a seventh day of record closes and climbed within 43 points of the round-number milestone. The gauge has rallied 8.6 percent since the Nov. 8 election and now trades almost 7 percent higher than its average price for the past 50 days. Its relative-strength index stood at the highest level in two decades, a signal to technical analysts that the surge may have gone too far too quickly.
European stocks reached an 11-month high as Italy’s largest lender laid out plans to raise capital. Treasuries stabilized with the 10-year yield holding below 2.50 percent for a second day, while the dollar was little changed versus major currencies as the Fed begins a two-day policy meeting. Oil settled at the highest level in 17 months.
Speculation that fiscal easing in the U.S. will drive growth is pushing investors into stocks as governments take the baton from central banks that are starting to scale back a decade of stimulus. With the market assigning 100 percent odds to a Fed rate hike Wednesday, investors are focusing on the path for 2017, and see a two-in-three chance of additional tightening by June.
“There is a strong performance across all equity markets at the moment,” said Andrzej Pioch, who helps oversee $1.3 billion as a money manager at Legal & General Investment Management Ltd in London. “In European stocks there has been a reaction to more clarity coming from Italy. The hike tomorrow is largely priced in.”
Here’s Wall Street correspondent Rupert Neate on today’s developments:
The US Federal Reserve on Wednesday raised interest rates for the first time in a year, and only the second time since the 2008 financial crisis. The US central bank also predicted three further rates increase in 2017, up from previous expectations of two rate hikes.
Janet Yellen, the Fed chairwoman, said “growth is a touch stronger, unemployment is a shade lower” as she announced a 0.25% increase in the benchmark rate to 0.50-0.75%.
It is the first time rates have been raised since December 2015 when the benchmark rate was lifted from near-zero for seven years since the crisis.
“My colleagues and I are recognizing the considerable progress the economy has made towards our dual objectives of maximum employment and price stability,” Yellen said.
“We expect that the economy will continue to perform well, with the job market strengthening further, and inflation rising to 2% over the next couple of years.”
You can take off the Dow 20,000 hats, folks.
The US stock market has closed in the red, with the Dow Jones index shedding 0.6% to finish at 19,792, a drop of around 118 points.
The wider S&P 500 lost 0.8%, while the Nasdaq handed back 0.5%.
That shows that the Fed was more hawkish than Wall Street expected, or wanted.
the trump rally just got torpedoed..it was coming..and they say 3 more rises next year..time to lock in mortgage rates?