Markets Gain Again on Bank Stocks and USD Strength

Markets Gain Again on Bank Stocks and USD Strength

US stocks rebounded from their worst day in two months as havens retreated. The dollar rallied to its strongest level since 2003 against the euro, while gold plunged as the prospect of a steeper path for US interest rates going forward filtered through markets. 

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Financial shares drove gains in major American equity benchmarks, while interest rate-sensitive stocks slipped after 10-year Treasury yields reached their highest level in more than two years. The greenback extended its advance against major and emerging-market peers after the Federal Reserve’s first, and last, rate hike of 2016 came with an increase in the number of increases expected next year. Gold tumbled to a 10-month low.

The Dow Jones industrial rose 59.59 points, or 0.3%  to 19,852.12, the S&P 500 gained 8.74 points, or 0.39% to 2,262.02 and the Nasdaq added 20.18 points, or 0.37% to 5,456.86.

Rising rents lifted underlying US inflation in November, pointing to a steady build-up of price pressures in the economy that could support more interest rate increases from the Federal Reserve next year.

The prospects of further monetary policy tightening in 2017 were also bolstered by other data on Thursday showing a drop in the number of Americans filing for unemployment aid last week.

The Fed raised interest rates on Wednesday for the second time since the 2007-2009 financial crisis and forecast three rate hikes in 2017. In addition to rising oil prices and a tight job market, inflation is likely to get a boost from the US President-elect's proposed expansionary fiscal policy agenda.

 

 


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