US stocks ended sharply higher on Wednesday, with the Dow Jones Industrial Average above 21,000 for the first time, as financials led the way on expectations for an interest-rate hike this month.
The blue-chip DJIA jumped 1.5 per cent to 21,115 on the day. The broader S&P 500 was up 1.4% to 2,396, having earlier marked an intraday record high of 2,400.98, and the Nasdaq Composite advanced 1.5% to 5,904. It too managed an intraday record high of 5,911.79.
Wednesday’s biggest gainer on the Dow was – no surprise – a bank. JPMorgan Chase (NYSE:JPM) up 3.3% to $93.60. The financials sector also led the way higher on the S&P 500.
The market odds of at least three Federal Reserve rate increases this year have jumped above the 50 per cent mark after a series of top central bankers offered hawkish remarks.
And those for a March rate hike are a done deal, as expectations exceed 80%. A week ago they stood at around 35%. The Fed next meets on March 14-15.
That helped spur the S&P 500 banks sector to a 3.2% gains on Wednesday, its biggest one day gain since November 14.
The broader S&P 500 financials index climbed 2.6% — its best day since equities rebounded and rallied on November 10 in the wake of Trump’s electoral surprise victory — and took the sector’s year-to-date gains to 7.9%.
Meanwhile, with all the market froth building up Snap (NYSE:SNAP) was poised to price its initial public offering at $17 a share, above the range it had projected, according to media reports.
The group behind the Snapchat vanishing messaging service had previously said that it expected to float its shares in the $14 – $16 range.
Pre-Open
US stocks are set to gain as the reality of a looming March rate hike set in and dollar strength made US assets more valuable, albeit of no advantage to exporters.
The dollar hit its highest level in more than six weeks on Wednesday morning, amid a sharp increase in bets that the US Federal Reserve will raise interest rates this month.
The dollar index hit 101.78 earlier on Wednesday, its strongest level since January 12th and a 0.3 per cent rise on the day, following hawkish comments from an influential member of the Federal Reserve’s policy-setting board.
The probability that rates will rise when the Federal Reserve meets this month shot up from 50 per cent to 80 per cent yesterday after William Dudley, head of the New York Federal Reserve, said that the prospects for adding to the December 2016 rate increase had become “a lot more compelling”.
To fuel that feeling, US inflation inched closer to the Federal Reserve’s 2% target in January even as American households tightened their purses more than expected.
The Federal Reserve’s preferred measure of inflation, the core personal consumption expenditures price index (PCE), climbed 0.4% in January, according to latest data published by the Commerce Department, and was up 1.9% from a year ago, close to the central bank’s inflation target, after hitting 1.6% in December.
The S&P 500 market bellwether is expected to open up 0.7%, the Nasdaq Composite up 0.6% and the outperformer – not surprisingly given its influential components like bank Goldman Sachs (NYSE:GS) is the Dow Jones Industrial Average, up 0.8%.
Meanwhile, a lacklustre speech thin on details disappointed investors overnight when US President Donald Trump visited Congress for the first time. But at least he didn’t alienate his own supporters who liked what he said and how he said it.
Read: Trump disappoints markets with lack of detail in first speech to Congress
It’s not been a good week for US retailers, with Target (NYSE:TGT) hammered over a poor outlook and media reports of a governance scandal at Signet Jewelers (NYSE:SIG) which the firm denied. Those share price falls came after JC Penney (NYSE:JCP) on Friday announced store closures.
The malaise continued on Wednesday as shares in Best Buy (NYSE:BBY) became best sell, falling more than 9% in pre-market trading on Wednesday after the consumer electronics retailer reported an unexpected drop in fourth-quarter sales and forecast further declines for the current fiscal quarter. The company, which is grappling with the disruption caused by e-commerce and the absence of a new “must have” gadgets, said like-for-like sales – a key industry metric – fell 0.7% in the three months to end of January, confounding expectations for a 0.5% increase.
Best Buy shares were down 3% at $42.80 pre-market.