Wall Street gallops to within a hair of 20,000 as US Fed meeting opens
US stocks extended their recent rally while the dollar held steady on Tuesday ahead of the US Federal Reserve’s expected interest rate hike and potential changes in its inflation and growth outlook.
All three major US stock indexes hit record closing highs and the Dow ended fewer than 100 points from the 20,000 mark. It breached 19,000 only last month in the post-US election move up. Gains in technology and energy companies boosted US stocks on Tuesday.
Uncertainty over whether the Fed would signal a slow or fast pace of rate increases following its meeting kept the dollar steady against a basket of currencies.
The Fed on Wednesday is widely expected to hike interest rates for the first time since last December and only the second since the 2007-2009 financial crisis, but investors will be examining the central bank’s statement and economic forecasts for any signs of how policymakers think President-elect Donald Trump’s election affects the outlook for growth and inflation.
The question is, “how much can their forecast change. In reality, the forecast can’t change that much because the data hasn’t changed that much,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. Yet, “the stock market is pricing in a big uptick in growth next year.
“Tomorrow what will be key is how the market digests that forecast.”
The US stock market’s rally has been driven largely by hopes of better US economic growth under Trump. The Dow has climbed about 9 per cent since the election.
The Dow Jones industrial average was up 114.78 points, or 0.58 per cent, to finish at 19,911.21, the S&P 500 gained 14.76 points, or 0.653977 per cent, to 2,271.72 and the Nasdaq Composite added 51.29 points, or 0.95 per cent, to 5,463.83.
The S&P technology and energy indexes each gained more than 1 per cent.
“I think what we’re seeing is the rally broaden out a little bit beyond the (small cap) Russell 2000 and the financial sector,” O’Rourke said, adding that technology has not gained as much as other sectors since the November 8 election.
In Europe, stocks were helped by gains in banks after Italy’s largest lender unveiled a 13 billion-euro share issue.
UniCredit launched Italy’s biggest share issue to clean up its balance sheet and boost profitability, the latest move to strengthen the Italian banking sector, which has been clouding the outlook for European stocks.
MSCI’s all-country world stock index was up 0.7 per cent, the pan-European STOXX 600 share index ended up 1.1 per cent.
Oil prices ended little changed, with support from OPEC’s plan to limit production offset by the International Energy Agency’s assessment that it believes OPEC produced about 34.2 million barrels a day in November, or an additional 500,000 bpd from OPEC’s estimate.
US crude futures settled up just 15 cents at US$52.98 a barrel, while Brent crude ended up three cents to $55.72. In other commodity markets, gold edged lower ahead of the expected Fed hike, with spot gold down 0.6 per cent at $1,155.65 an ounce.