While you were sleeping: Wall Street hits records

Friday 19th September 2014

Wall Street rose, pushing the Dow and S&P 500 to record highs, after a larger-than-expected drop in US jobless claims and the Federal Reserve’s fresh promise to keep interest rates low.

A Labor Department report showed US jobless claims fell by 36,000 to 280,000 in the period ended September 13. Meanwhile, a Commerce Department report showed housing starts fell 14.4 percent to a seasonally adjusted 956,000-unit annual pace in August, down from an upwardly revised 1.12-million unit rate in July, the highest since November 2007.

"Any rate hike will be data dependent, and the Fed won’t do it anywhere in the near-to-intermediate term unless they think it will have no impact on the economy," John Manley, chief equity strategist at Wells Fargo Funds Management in New York, told Reuters.

On Wednesday Federal Reserve policy makers maintained their commitment to keeping interest rates near zero for a “considerable time” after the end of its monthly asset purchases. The Fed cut its monthly asset purchases to US$15 billion, staying on target to end the program next month.

In late afternoon trading in New York, the Dow Jones Industrial Average added 0.54 percent, the Standard & Poor’s 500 Index advanced 0.45 percent and the Nasdaq Composite Index gained 0.65 percent. Earlier in the day, the Dow climbed to a record high 17,262.91 and the S&P 500 touched a record 2,011.79

Gains in shares of DuPont and those of Goldman Sachs, up 2.9 percent and 1.8 percent respectively, led the climb in the Dow. Financial stocks spearheaded the advance among the 10 primary industries in the S&P 500 as the Fed on Wednesday also indicated it expects the fed funds rate to rise more in 2015 and 2016 than previously expected.

"A higher rate structure helps financials generate more profits,” Manley told Reuters. “Higher interest rates are not bad for [the sector] unless it meant the Fed is trying to slow the economy.”

In Europe, the Stoxx 600 finished the day with a 1 percent rally from the previous close. France’s CAC 40 gained 0.8 percent, while Germany’s DAX climbed 1.4 percent.

Shares of Bayer jumped 4.6 percent after the company announced plans to spin off its plastics business.

“They can basically now look to a target to buy with the proceeds,” Fabian Wenner, a Zurich-based analyst for Kepler Cheuvreux, told Bloomberg News. “They’ve always known they didn’t need this business, but they haven’t had a target to replace it with.”

The UK’s FTSE 100 Index rose 0.6 percent, while the pound climbed to the highest level in two years against the euro, as investors bet Scottish voters in Thursday's referendum will favour remaining in the United Kingdom over independence.

BusinessDesk.co.nz

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