While you were sleeping: Fed stays pat, Boeing rallies, Treasuries slide
Wall Street finished higher after recovering from a late-session slump when the US Federal Reserve decided to leave interest rates unchanged but but reiterated plans to gradually raise them in the near term..
The blue chip industrials were bolstered by a rally in Boeing shares after better-than-expected results, while US Treasuries slid amid concern about additional supply and interest rate increases.
Boeing shares rose 4.5% after the plane maker offered an upbeat full-year outlook that exceeded analysts' forecasts.
"Actual results could ultimately be higher," Seth Seifman, an analyst at JPMorgan, said in a note to clients, Reuters reported. "As a result, we expect the stock to outperform despite its recent run now that management has set the table for a solid 2018."
At the close of trading in New York, the Dow Jones Industrial Average rose 72.50 points, or 0.3%, to 26,149.39. Early in the session it reach 26,338 but then shed some 280 points to 26,051 before recovering toward the close.
The Nasdaq Composite Index gained 0.1% to 7411.48 at the close and the Standard & Poor's 500 Index added 0.05% to 2823.81.
The Fed’s statement said officials expected inflation would move higher this year and stabilise around 2% over the medium term.
Fourth rate rise looms
Some analysts said they thought investors were bracing for the possibility of a more aggressive central bank, pushing up Treasury yields and weighing on stocks. The possibility of a fourth rate hike rises as the US economy firms up.
"In general, people are a lot more concerned about a hawkish tone from the [Federal Reserve]," Michael Antonelli, managing director of institutional sales trading at Robert W Baird, told Reuters.
"While the market has priced in three rate hikes for 2018, if the economy continues to firm up and earnings remain solid, the possibility of a fourth rate hike definitely becomes more firm."
The US Treasury said it would increase the amount of long-term bonds it will sell this quarter.
Indeed, January has been a rough month for US Treasuries. Ten-year yields have surged about 33 basis points last month, reaching 2.729%, the highest since April 2014.
"What we've been witnessing is a melt-up of Treasury yields," Charles Ripley, investment strategist and fixed-income portfolio manager at Allianz Life Insurance, told Bloomberg.
"It's a supply story supported by fundamentals at home and abroad, at a time when the largest buyer is pulling back," he added, referring to the Fed.
Payrolls continue to expand
Underpinning signs of a robust labour market, an ADP Research Institute report showed US companies increased payrolls by 234,000 in January, exceeding forecasts by economists.
"The job market juggernaut marches on," Mark Zandi, chief economist of Moody's Analytics in West Chester, Pennsylvania, said in a statement.
"Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over two million jobs. If it falls short, it is likely because businesses can't find workers to fill all the open job positions."
In Europe, the Stoxx 600 Index fell 0.2%. Germany's DAX Index slipped 0.1%, the UK's FTSE 100 index dropped 0.7% and France's CAC40 Index gained 0.2%.