Dow Flirts With 20,000 as Stocks Rise, Gold Falls Ahead of Fed

  • Blue-chip index 90 points from milestone as tech joins rally
  • Traders assign 100% odds to a Fed rate hike on Wednesday

What Are Traders Watching in Global Markets?

Global stocks advanced, sending the Dow Jones Industrial Average surging toward 20,000 on speculation that the Federal Reserve’s expected rate increase is a signal of confidence that the world’s largest economy is strengthening. The dollar and Treasuries were little changed.

Intel Corp. and Apple Inc. led gains in the blue-chip index as it capped a seventh day of record closes and climbed within 43 points of the round-number milestone. The gauge has rallied 8.6 percent since the Nov. 8 election and now trades almost 7 percent higher than its average price for the past 50 days. Its relative-strength index stood at the highest level in two decades, a signal to technical analysts that the surge may have gone too far too quickly.

European stocks reached an 11-month high as Italy’s largest lender laid out plans to raise capital. Treasuries stabilized with the 10-year yield holding below 2.50 percent for a second day, while the dollar was little changed versus major currencies as the Fed begins a two-day policy meeting. Oil settled at the highest level in 17 months.

Speculation that fiscal easing in the U.S. will drive growth is pushing investors into stocks as governments take the baton from central banks that are starting to scale back a decade of stimulus. With the market assigning 100 percent odds to a Fed rate hike Wednesday, investors are focusing on the path for 2017, and see a two-in-three chance of additional tightening by June.

“There is a strong performance across all equity markets at the moment,” said Andrzej Pioch, who helps oversee $1.3 billion as a money manager at Legal & General Investment Management Ltd in London. “In European stocks there has been a reaction to more clarity coming from Italy. The hike tomorrow is largely priced in.”

Stocks

  • The S&P 500 rose 0.7 percent to an all-time high 2,271.63 at 4 p.m. in New York, while the Dow climbed 112.11 points to 19,908.54. The Nasdaq 100 Index advanced to its first record since October, while small caps rebounded from a 1 percent drop on Monday.
  • Exxon Mobil Corp. rose 1.8 percent after Donald Trump nominated CEO Rex Tillerson to lead the State Department.
  • The Stoxx Europe 600 Index advanced 1.1 percent to the highest since January. Banca Monte dei Paschi di Siena SpA climbed after a European Union official said the lender may be eligible for a precautionary recapitalization if efforts to plug the private sector fail.
  • Emerging market shares rose 0.6 percent for the fifth gain in seven sessions.

Currencies

  • The yen weakened 0.3 percent to 115.31 per dollar, following Monday’s 0.3 percent climb. The euro fell 0.1 percent to $1.0620.
  • The pound gained against all of its Group-of-10 peers as a report showed inflation accelerated to the highest level in more than two years.

Bonds

  • Yields on Treasury notes due in 10 years were at 2.48 percent. Long-dated Treasuries outperformed as demand rebounded at an auction of 30-year notes, while yields on shorter maturities were steady ahead of the Fed decision.
  • Italian bonds gained for a second day, with the yield on 10-year bonds falling 12 basis points to 1.87 percent. Similar-maturity German bunds saw yields slide three basis points to 0.36 percent.

Commodities

  • West Texas Intermediate rose to a 17-month high, adding 0.3 percent to settle at $52.98. Oil has risen about 17 percent since the Organization of Petroleum Exporting Countries agreed Nov. 30 to trim output for the first time in eight years.
  • Brent for February settlement rose 3 cents to $55.72 a barrel, also the highest since July 2015.
  • Gold traded near a 10-month low as investors prepared for the first U.S. rate increase in a year.

— With assistance by Cecile Gutscher, Kana Nishizawa, Agnieszka De Sousa, and Sofia Horta E Costa

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