Financial stocks, which stand to gain the most in a higher interest rate environment, rose as traders raised bets on a hike in the coming months.
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Financial shares in the S&P 500 rose 1%.
USA stocks extended earlier gains Monday as Wall Street digested comments last week from top Federal Reserve officials, including Chair Janet Yellen and Vice Chair Stanley Fischer, who pointed to a near-term rate hike potentially as soon as next month.
In clear language, all this means that monetary policies of the United States from one side and from the other side, the Euro area, which by the way will have its inflation data on Wednesday but that will remain too low, the UK, Japan, and others are set to diverge further, which will make the Fed’s normalization process hard, but not impossible.
The yen slid 0.5 percent to 102.34 per dollar as of 7:15 a.m.in London, extending a three-day 1.6 percent decline.
The Dow Jones Industrial Average on Monday increased 121.97 points, or 0.66 per cent, to 18,517.37, Xinhua news agency reported.
The S&P 500 .SPX was up 12.28 points, or 0.57 percent, at 2,181.32. Friday’s GDP report revised second-quarter growth down to 1.1%, confirming that the U.S.is suffering its weakest recovery since 1949. The Nasdaq Composite was up 13.41 points, or 0.26 per cent, at 5,232.33.
The dollar gained slightly after data on Monday showed that US consumer spending increased in July for the fourth straight month, although inflation remained subdued.
“The Fed is walking on a tightrope, by talking about a rate hike, but not necessarily spooking the markets”.
US Treasury yields maturing between 2-10 years dipped on foreign demand after touching their highest levels since June on Friday. The US dollar and Treasury yields also see-sawed prior to their high finish. That followed gains of 1.3 percent on Friday, its biggest one-day advance in nearly seven weeks.
Oil prices settled down more than 1 per cent on Monday, snapping two consecutive days of gains, on caution over galloping Middle East crude output and a firmer dollar boosted by speculation of a US rate hike by year-end.
The US economy added 180,000 jobs in August, according to the median estimate of a Bloomberg survey before Friday’s payrolls data. US crude futures dropped 1.5 percent to $46.94, while Brent crude fell 1.4 percent to $49.21. A stronger dollar makes commodities denominated in the greenback less affordable for holders of other currencies.
Brent crude settled down 66 cents, or 1.3 per cent, at $49.26 a barrel.
Prices had rallied earlier in August on hopes that the Russian Federation and Organisation of the Petroleum Exporting Countries could agree next to limit production in a bid to balance supply and demand and stabilise prices Russian Federation, which is not an Opec member, is due to join next month’s informal meeting in Algeria at which participants are expected to discuss production.
Despite that, some analysts cautioned investors against taking an outright short position on oil as OPEC was likely to counteract with production freeze talk.
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Iran also said late last week that it would only cooperate in upcoming producer talks in September if other exporters recognized Tehran’s right to regain market share lost during global sanctions that were lifted in January.
