U.S. Stocks Hold Gains as Fed Hints at Interest-Rate Raise
May 24 2017 - 2:41PM
Dow Jones News
By Christopher Whittall and Riva Gold
U.S. stocks held their gains Wednesday after the minutes from
the Federal Reserve's latest policy meeting showed officials
believe it will "soon be appropriate to raise short-term interest
rates.
The Dow Jones Industrial Average edged up 46 points, or 0.2%, to
20984. The S&P 500 gained less than 0.1% and the Nasdaq
Composite added 0.2%.
Among the biggest gainers, real-estate stocks in the S&P 500
rose 0.6%, while shares of utilities gained 0.6%. Those sectors are
often considered bondlike, because they typically pay relatively
high dividends and investors tend to buy them when they are nervous
about other parts of the market.
Shares of basic materials producers in the S&P 500 rose
0.5%. Dow component DuPont gained 1.2%.
U.S. stocks have climbed in recent sessions as corporate
earnings growth helped outweigh concerns over the ability of the
Trump administration to push through its policy agenda, including
tax cuts.
Many investors are now focusing on central bank policy ahead of
pivotal meetings next month for the Federal Reserve and the
European Central Bank. Federal Reserve officials at their May 2-3
policy meeting voiced support for a plan to shrink the central
bank's roughly $4.5 trillion portfolio of bonds and other assets
via a tapering approach this year, according to minutes of the
gathering.
"The Fed is key," said Sam Stovall, chief investment strategist
at CFRA Research. Mr. Stovall thinks it is highly likely the Fed
will raise interest rates at its June 13-14 meeting, but that
shouldn't be "any kind of deterrent at all to the advance in equity
prices."
The Federal Reserve's stimulus policies have helped buoy stocks
and bond markets in recent years. But many investors view rate
increases as a vote of confidence in the U.S. economy that
shouldn't derail financial markets, particularly if the Fed
continues to move at a gradual pace. Higher interest rates also
tend to boost the profitability of certain companies such as
banks.
Federal Reserve Bank of Philadelphia President Patrick Harker
said Tuesday that he views it as appropriate to raise interest
rates two more times in 2017.
The WSJ Dollar Index, which measures the buck against a basket
of 16 other currencies, was down 0.2%. The yield on the benchmark
10-year U.S. Treasury note was at 2.26%, according to Tradeweb,
from 2.285% Tuesday. Yields fall as prices rise. Treasury yields
and the dollar are sensitive to Federal Reserve policy, with both
tending to gain when expectations of rate increases grow.
The Stoxx Europe 600 rose less than 0.1%, with gains in travel
and leisure shares largely offsetting declines in the auto sector.
Shares of Daimler declined 1.6% after German authorities turned up
the heat in an investigation into alleged diesel-emissions
fraud.
In Asia, Chinese stocks pared initial losses to end higher after
Moody's Investors Service lowered the country's credit rating for
the first time since 1989. The Shanghai Composite Index notched a
gain of less than 0.1%.
"I don't think [the downgrade] came as a surprise to people
invested in China," said Hao Hong, head of research at BoCom
International in Hong Kong.
Most other markets in the region ended higher. A recent rebound
in the dollar against the yen helped send Japan's Nikkei Stock
Average up 0.7%, while Australian stocks rose 0.2%.
In commodities, U.S. crude oil prices slipped 0.6% to $51.18 a
barrel ahead of Thursday's closely watched meeting of the
Organization of the Petroleum Exporting Countries, where major
producers are expected to extend ongoing production cuts.
Aaron Kuriloff contributed to this article.
Write to Christopher Whittall at christopher.whittall@wsj.com
and Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
May 24, 2017 14:26 ET (18:26 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.