S&P 500, Nasdaq book record close as Fed signals strong economy with one eye on coronavirus

The S&P 500 and Nasdaq finished at all-time highs Wednesday as investors were encouraged by comments from the Federal Reserve and measures China says it has taken to help coronavirus-stricken businesses.

The Dow Jones Industrial Average DJIA, +0.40% advanced 115.84 points, or 0.4%, to 29,348.03. The S&P 500 SPX, +0.47% rose 15.86 points, or 0.5%, to end at 3,386.15, marking a record finish, supported by gains in the energy sector XLE, +1.33%, up 1.4%, and information technology XLK, +1.19%, rising 1.1%.

The Nasdaq CompositeCOMP, +0.87% added 84.44 points, or 0.9%, to end the session at a record at 9,817.18, its second all-time closing high in a row.

Minutes from the rate-setting Federal Open Market Committee’s January meeting showed that Fed officials believe the U.S. economy appeared stronger in late January than they had been expecting.

However, Fed members at the meeting, where they kept rates at a 1.50%-1.75% range, expressed concerns about the threat of the coronavirus outbreak in China, and of tensions in the Middle East, which may suggest that the central bank may be more inclined to ease rates than to raise them in the near-term.

Policy makers emphasized their intention to provide some stability for markets and the economy for a time after cutting rates three times in succession last year. Specifically, they discussed “maintaining the current policy stance for a time could be helpful in supporting U.S. economic activity in the face of global developments that have been weighing on spending decisions,” the minutes said.

U.S. stocks have remained in an uptrend for February, helped by corporate earnings reports, despite the potential for slowing global economic growth due to disruptions to trade and travel caused by COVID-19, the infectious disease that originated in Wuhan, China late last year.

Chinese officials have said the rate of new cases has begun to ebb, but the World Health Organization has recommended caution.

On Wednesday, investors also appeared heartened by comments from China’s Ministry of Industry and Information Technology, which said Beijing would help companies to identify weak links in supply chains, The Wall Street Journal reported.

The assistance is one of several steps that Beijing and local Chinese authorities have taken to limit the economic fallout of the coronavirus, which has sickened 75,000 people and claimed more than 2,000 lives.

“The global economic outlook remains mired in uncertainty at this point in time, with coronavirus-related warnings emanating out of Apple and corporate America,” said Han Tan, market analyst at FXTM, in a research report, referring to Apple Inc.’s warning on Monday, which weighed on stocks on Tuesday.

In U.S. economic reports, the Commerce Department said housing starts fell 3.6% in January to an annual pace of 1.57 million, but permits rose to a 13-year high of 1.55 million. U.S. producer prices jumped 0.5% last month, its biggest increase in 15 months.

“Net, net, the economy looks good with residential home building activity beating expectations and a little more producer price inflation even if the data overstate how well the country is doing in terms of generating the growth and inflation the Federal Reserve wants to see,” said Chris Rupkey, chief economist at MUFG.

The price of a barrel of West Texas Intermediate crude for March delivery CLH20, +2.32% rose $1.24, or 2.4%, to settle at $53.29 a barrel on the New York Mercantile Exchange, after the Trump administration sanctioned an arm of Russian oil giant Rosneft.

Gold for April delivery GCJ20, +0.67% post a fifth straight gain, rising 0.5%, to settle at 1,611.80 an ounce, extending its climb above the psychologically important level at $1,600.

The U.S. dollar DXY, +0.15% was up 0.2% against a basket of rival currencies at 99.62.

The benchmark U.S. 10-year Treasury note TMUBMUSD10Y, +0.28% was flat at 1.56%. Bond yields fall when prices rise.

In Europe, the Stoxx Europe 600SXXP, +0.83% closed 0.8% higher at 433.90, while the FTSE 100 UKX, +1.02% climbed 1% to end at 7,457.02.

In Asia overnight, the China CSI 300 000300, -0.15% ended 0.2% lower to close at 4.051.31, the Shanghai Composite SHCOMP, -0.32% edged down 0.3% at 2,975.40, and the Hang Seng Index HSI, +0.46% gained 0.5% to 27,655.81. The Nikkei 225 NIK, +0.89% rose 0.9% to 23,400.70.

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