Wall Street extends gains, eyes end of rate-hike cycle

By Noel Randewich (Reuters) - U.S. stocks extended gains on Wednesday after a widely expected interest rate hike by the U.S

Reuters September 27, 2018 02:05:14 IST
Wall Street extends gains, eyes end of rate-hike cycle

Wall Street extends gains eyes end of ratehike cycle

By Noel Randewich

(Reuters) - U.S. stocks extended gains on Wednesday after a widely expected interest rate hike by the U.S. Federal Reserve and as investors bet that the central bank is approaching the end of a cycle of tightening monetary policy.

The Fed raised interest rates and left its monetary policy outlook for the coming years largely unchanged amid steady economic growth and a strong job market.

In a policy statement that marked the end of an era of "accommodative" monetary policy, Fed policymakers lifted the benchmark overnight lending rate by a quarter of a percentage point to a range of 2.00 percent to 2.25 percent.

The rate-sensitive S&P 500 financial index <.SPSY> was 0.43 percent lower, with bank shares <.BKX> down 0.58 pct.

The S&P 500 utilities index <.SPLRCU> and real estate index <.SPLRCR>, also both sensitive to interest rates, were down 0.16 percent and 0.06 percent, respectively.

The Fed still foresees another rate hike in December, three more next year, and one increase in 2020. An eventual end to the Fed's current rate hike cycle would be viewed as good for stock investors.

"The Fed removed the word 'accommodative' from its statement and to me that's a dovish signal," said Mark McCormick, head of North American FX Strategy at TD Securities in Toronto. "It means that the Fed is more or less in a neutral stance and is probably close to being done raising rates, even though they flagged a few more hikes."

The stock market has enjoyed a boom period and is at record levels. But as rates rise, equities face rising competition for investors' funds not only from bonds, but also from cash, which is now the most attractive it has been in about a decade.

The Dow Jones Industrial Average <.DJI> was up 0.34 percent at 26,582.16 points, while the S&P 500 <.SPX> gained 0.45 percent to 2,928.75.

The Nasdaq Composite <.IXIC> added 0.68 percent to 8,062.03.

"It confirmed that the economy continues to respond positively to the tax cuts and deregulation that were implemented, and that the trend will continue to be higher interest rates, but nothing alarming where it could shake the markets," said Alan Lancz, president of Alan B. Lancz & Associates.

The S&P 500 health index <.SPXHC> rose 0.88 percent as biotechs led the gains, while the newly-formed communication services index <.SPLRCL> rallied 1.06 percent, boosted by Facebook , up 2.0 percent.

Twenty-First Century Fox rose 1.5 percent after agreeing to sell its stake in Sky to Comcast , which gained 0.83 percent. Disney , which is buying Fox, jumped 1.86 percent.

Nike fell 0.86 percent as the sportswear maker stuck to its full-year forecast even after sales got a boost from a controversial ad campaign featuring former NFL player Colin Kaepernick.

Advancing issues outnumbered declining ones on the NYSE by a 1.17-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favoured advancers.

The S&P 500 posted 30 new 52-week highs and 12 new lows; the Nasdaq Composite recorded 59 new highs and 56 new lows.

(Additional reporting by Amy Caren Daniel in Bengaluru and Caroline Valetkevitch in New York; Editing by Bernadette Baum and Nick Zieminski)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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