‘If the Fed feels ... confident, maybe we should too’

“People were concerned Trump was maybe running off the rails. After the speech last night everybody walked away with a good feeling,” said Stephen Massocca, senior vice-president at Wedbush Securities in San Francisco. “Some of the things he said, the algebra doesn’t work but people know the direction it’s going to go.”

The S&P financial index soared 2.84 per cent, outperforming the other 10 major sectors, also helped by key U.S. Federal Reserve officials who hinted at an interestrate hike this month.

A March rate hike would be sooner than many investors expected and make it more expensive to borrow money to buy stocks but it would also signal policymakers’ growing confidence in economic expansion after nearly a decade of tepid growth.

“It’s not necessarily the rate increase that matters. It’s that they’re seeing things improving. If the Fed feels more confident, maybe we should too,” said Warren West, principal at Greentree Brokerage Services in Philadelphia.

Adding to expectations of stronger economic growth, the Institute for Supply Management said its manufacturing index rose in February to its highest since 2014.

The perceived chances of a March rate hike also rose after the U.S. Commerce Department reported that January inflation ticked up by the most in four years.

Traders have now priced in a nearly 70-per-cent chance of a rate hike when the Fed’s policy-setting body meets on March 14-15, according to Thomson Reuters data.

The Dow Jones industrial average jumped 1.46 per cent to end Wednesday at 21,115.55, while the S&P 500 rallied 1.37 per cent to 2,395.96. The Nasdaq composite climbed 1.35 per cent to 5,904.03.

Seven of the 11 major S&P sectors gained more than one per cent, including energy, up 2.05 per cent.

About 8.1 billion shares changed hands on U.S. exchanges, the most in 2017 and well above the 6.9 billion daily average for the past 20 trading days, according to Thomson Reuters.

On Thursday, all eyes will be on the trading debut of Snap Inc., owner of popular messaging app Snapchat.

Despite having never turned a profit, Snap on Wednesday raised US$3.4 billion in an initial public offering, giving it a valuation of US$24 billion. That is the richest valuation in a U.S. tech IPO since Facebook in 2012.

During Wednesday’s session, Lowe’s jumped 9.5 per cent after the home improvement chain issued an upbeat sales forecast.

While corporate earnings have improved recently, stock valuations remain unusually high. The S&P 500 is trading near 18 times expected earnings, compared to its 10-year average of 14, according to Thomson Reuters Datastream.

Advancing issues outnumbered declining ones on the NYSE by a 2.08-to-1 ratio; on Nasdaq, a 3.05-to-1 ratio favoured advancers.

The S&P 500 posted 140 new 52-week highs and five new lows; the Nasdaq recorded 218 new highs and 38 new lows.