2 mins to read

While you were sleeping: UPDATED Wall Street recovers, greenback rallies

Bond prices and gold continue to fall as market reacts to Federal Reserve rate hike.

Margreet Dietz
Fri, 16 Dec 2016

Wall Street renewed its climb after Wednesday's plunge, as did the US dollar, a day after the Federal Reserve signalled a steeper path for interest rate increases, offering further optimism about the outlook for the US economy and corporate profits.

The bond selloff deepened and gold fell further. 

Fed policy makers on Wednesday indicated they now see three quarter-point rate hikes next year, up from the two expected in their previous forecasts.

"Investors are buying Federal Reserve chairwoman Janet Yellen's story that the rate hike is a vote of confidence in the economy," Dave Donabedian, chief investment officer of Atlantic Trust in Boston, told Reuters.

"The economy is growing, the job market is strong and ... monetary normalisation can proceed."

Dow adds 60 points
At the close, the Dow Jones Industrial Average added 59.71 points, or 0.3%, to 19,852.24. The Nasdaq Composite Index gained 0.4% to 5456.84 while the Standard & Poor's 500 Index also climbed 0.4% to 2262.03.

The Dow rose, led by gains in shares of JPMorgan Chase and those of Goldman Sachs, trading 2% and 1.9% higher respectively.

The US dollar also strengthened, and some see further gains ahead. It rose 0.2% against the yen to ¥117.925, while the euro was down 0.4% at $US1.0425.

"At the moment it feels as though going long dollar is free money, no one loses," Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander in London, told Bloomberg.

"The market believes it can push for another 2-3% relatively risk-free, a nice Christmas bonus. The market never appears to need a reason to be negative about the euro."

The yield on the benchmark 10-year US Treasury note was at 2.58%, up from 2.523% on Wednesday – its highest level since September 2014.

Gold futures for delivery in December fell 2.9% to $US1127.80 an ounce, while US crude oil fell 0.3% to $US50.90 a barrel after shedding more than 3% on Wednesday.

Murdoch wants all of Sky
In corporate news, Rupert Murdoch's Twenty-First Century Fox agreed to buy the 61% Sky it doesn't already own in a $US14.6 billion deal.

"Sky is much more than a satellite distribution company, it's a creative, commercial and consumer powerhouse," James Murdoch, the chief executive of Fox and chairman of Sky, told analysts on a call, according to Reuters.

Meanwhile, shares of Yahoo slumped, down 4.4% to $US39.10 after earlier falling as low as $US38.25, amid concern that its latest disclosure of a massive hacking of its users' data might jeopardise Verizon's deal to buy it.

"Yahoo has fallen down on security in so many ways I have to recommend that if you have an active Yahoo email account, either direct with Yahoo of via a partner like AT&T, get rid of it," Stu Sjouwerman, chief executive of cyber security firm KnowBe4, said in a broadly distributed email, Reuters reported.

In Europe, the Stoxx 600 Index finished the session with a 0.9% gain from the previous close, bolstered by financial stocks. The index closed at its highest level since January, according to Bloomberg. The UK's FTSE 100 Index increased 0.7% while Germany's DAX Index and France's CAC 40 Index each rallied 1.1%.

"Market participants are re-playing the theme that a US hike means a stronger dollar and a weaker euro, which is good for European stocks overall," Stephane Ekolo, chief European strategist at Market Securities, told Bloomberg.

"If you add expectation for a rise in economic growth and inflation in Europe and a recovery in earnings, all that bodes well for European stocks at the moment."


Margreet Dietz
Fri, 16 Dec 2016
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
While you were sleeping: UPDATED Wall Street recovers, greenback rallies