Stocks posted solid gains on Thursday as investors, comfortable that the Federal Reserve will keep interest rates low, bought up stocks that pay big dividends. “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives”. Inflation remains below the USA central bank’s target of 2 per cent and members saw room for improvement in the labour market. While the United States central bank still sees a rate hike this year, it trimmed its projection for increases in 2017 to two from three.
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Fed Chair Janet Yellen said on Wednesday that USA growth was looking stronger and rate increases would be needed to keep the economy from overheating and fuelling high inflation. Market pricing for a December move rose only a fraction to 59.3 per cent from 59.2 per cent, according to CME Group’s FedWatch tool.
“Clearly the markets view the Fed’s inaction as favorable. but if you read between the lines, the Fed is concerned about the strength of the economy”, said Matt Schreiber, chief investment officer at WBI Investments in Red Bank, New Jersey.
“The Fed and central banks worldwide have been providing investors with a sense of calm and complacency”.
The Australian dollar edged up to an nearly two-week high of US$0.7641 after new Reserve Bank of Australia Governor Philip Lowe said interest rate cuts and a weaker currency were helping the economy, but that it was “not particularly useful” to keep cutting rates in the hope that this would eventually lift growth.
The dollar index.DXY dropped 0.5 percent to 95.189.
Oil climbed after a surprisingly large drop in US crude inventories emboldened investors ahead of next week’s meeting between OPEC members and Russian Federation to discuss supply.
Adding some support for the Fed to raise rates later this year, a report showed number of Americans filing for unemployment benefits unexpectedly fell last week to a two-month low.
The Dow Jones industrial average gained 98 points, or 0.5 percent, to 18,392. All but one of its 30 components were higher.
In early trading, benchmark 10-year Treasury notes rose 12/32 in price for a yield of 1.627 per cent, down 4 basis points from Wednesday. The Nasdaq composite climbed 44 points, or 0.8 percent, to 5,339. The stocks were among the biggest positive influences on the S&P.
Apple rose 0.9 per cent to $114.56 after Nomura and RBC raised their price targets.
Weyerhaeuser was the top percentage gainer on the S&P, rising 5.1 per cent to $31.88 after Goldman Sachs initiated coverage of the real estate investment trust with a “buy” rating.
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Advancing issues outnumbered decliners on the NYSE by 2,467 to 516. In other energy commodities, heating oil rose 2.5 cents to $1.45 a gallon, wholesale gasoline rose less than 1 cent to $1.40 a gallon and natural gas fell 7 cents to $2.99 per 1,000 cubic feet.
