US top stocks came within a whisker of marking a fresh record high on Thursday as the market lapped up good news from the retail sector while Fed warnings of a rate hike were soothed by soft data and testimony from the central bank’s chief to Congress.
The market bellwether S&P 500 closed up 0.5% at 2187 – just shy of the 2190 record high struck in mid-August. The top gainer was Best Buy (NYSE:BBY) up 13.7% to $45.99 after bullish earnings. Volumes were busy too, at 25.4mln shares traded versus an average daily volume of 6.4mln.
But the biggest market story of the day was Fed chairman Janet Yellen warning that a rate hike sooner rather than later was on the cards - but revealing just enough to keep the market guessing whether it will be next month.
Even with Fed fund rates pricing in a more than 90% chance of a hike on Dec 14, US core inflation October was reported unchanged at up 0.1% - which was below market consensus forecast.
Meanwhile, the Philadelphia Fed Manufacturing Index for November also came in softer than expected, at 7.6 versus expectations of 8.0 and down from 9.7 in October.
Despite home improvements stores reporting fragile numbers this week, it appears that housing starts are pushing higher.
In October, housing starts were up 25% month-on-month versus a 9.5% decline the precious month and expectations of only a 7% gain.
The S&P Midcap 400 closed 0.6% higher at 1605 and led by Western Refining (NYSE:WNR), up 23.1% at 37.55 after a takeover approach from Tesoro (NYSE:TSO).
The S&P Smallcap 600 closed up 0.5% at 799 and led by Children's Place Inc (NASDAQ:PLCE) up 13.2% to $99.20.
The wider small-cap Russell 2000 ended up 0.6% at 1309 and Toronto’s TSX Composite was up 0.6% at 14,826.
Early trading
US stocks were higher on Thursday but off their session peak after the US central bank chief warned that a rate hike was coming “relatively soon”.
The hallmark ambivalence of chairman Janet Yellen means that banks have something to look forward to – higher rates – while growth stocks dependent upon credit had some room for relief that it was no longer obvious to be at the next meeting on Dec 14.
The S&P 500 market bellwether was up 0.2% at 2180 and led by Netapp Inc (NASDAQ:NTAP), up 8.8% to $37.81 after reporting forecast-beating second quarter earnings.
The second-biggest riser was electronics retailer Best Buy (NYSE:BBY) after reporting bumper third-quarter results. Read more.
The S&P Midcap 400 was up 0.4% at 1601 and led by Western Refining (NYSE:WNR), up 23.5% to $37.67 after US oil refiner Tesoro Corp (NYSE:TSO) said on Thursday it would buy Western Refining for $4.1 billion to add refineries in Texas, New Mexico, and Minnesota.
The combined company will have refining capacity of over 1.1 million barrels per day. Tesoro has refineries in California, Washington, Alaska, Utah, and North Dakota.
Tesoro shares were up 2.3% to $87.75.
Meanwhile, the S&P Smallcap 600 added 0.4% to 798 and led by Children's Place Inc (NASDAQ:PLCE), up 9.5% to $95.95 after reporting third quarter sales jumped by nearly 5% and declared its quarterly dividend.
But monetary policy remained the top story for markets.
The Federal Reserve could raise interest rates "relatively soon" if economic data keeps pointing to an improving labour market and rising inflation, Yellen said in a clear hint the US central bank could hike next month. But could is all it is.
Yellen said Fed policymakers at their meeting earlier in November judged that the case for a rate hike had strengthened.
"Such an increase could well become appropriate relatively soon," Yellen said in prepared remarks that were her first public comments since the United States elected Republican Donald Trump to be the country's next president.
Yellen, who was to deliver the remarks to Congress's Joint Economic Committee at 10 a.m. ET on Thursday, said the economy appeared on track to grow moderately, which would help bring about full employment and push inflation toward the Fed's 2% target.
Two other Fed officials speak Thursday. New York Fed President William Dudley made welcoming remarks at a forum at the New York Fed, while Federal Reserve Governor Lael Brainard speaks at 12:30 ET (1730 GMT) at the forum.
Pre-Open
Shares look set to claw back most of yesterday’s losses at the outset, ahead of an appearance before Congress by central bank boss Janet Yellen.
The S&P 500 index, which yesterday eased three points to 2,177, is expected to open two points higher this morning.
The more narrowly-based Dow Jones average is expected to nudge up three or four points, weighed down by a lukewarm reception to third quarter results from supermarkets behemoth Wal-Mart.
As ever, traders will be tuning into Yellen’s appearance before congress to see whether she drops any hints as to whether the Federal Reserve is likely to hike interest rates in December.
It is almost certain legislators will ask her for her views on President-elect Donald Trump’s professed desire to invest heavily in infrastructure in the US.
Ahead of the official opening of trading, solar power firm First Solar Inc (NASDAQ:FSLR) was in the shade, down 12%, after it announced plans to cut more than a quarter of its global workforce.
Big barn retailer Best Buy Co Inc (NYSE:BBY) was wanted after releasing better-than-expected results.
The electrical goods seller’s third quarter adjusted earnings per share rose to 60 cents from 37 cents the year before, prompting a 7% rise in the share price.
Referring to the full-year earnings expectations, Corie Barry, Best Buy’s bean counter, said “we expect to deliver non-GAAP diluted earnings per share in the range of $1.62 to $1.67 compared to $1.53 last year”.
Sector peer Staples Inc (NASDAQ:SPLS) was slightly off the pace in pre-market trading after third quarter sales eased to US$5.36bn from US$5.59bn the year before.
The office equipment seller said it had reached agreement to sell its UK retail business to Hilco Capital for a nominal sum.
The biggest retailer of them all, Wal-Mart Stores Inc (NYSE:WMT), was down 3% in pre-market trading after it reported a 1.2% increase in like-for-like sales in the US in the third quarter.
The company now expects full-year GAAP EPS of US$4.34 to US$4.49, and adjusted full-year EPS of U$4.20 to US$4.35.