Dollar rebounds, stocks mixed ahead of Federal Reserve decision
NEW YORK (Reuters) – Wall Street stocks pared their early gains on Wednesday as utility and energy shares in the US dragged. But the dollar remained higher along with major equity markets around the world as strong data suggested the global economy is picking up steam.
US factory activity hit a more than a two-year high in January, and a private payrolls report shot past expectations.
Euro-zone factories registered the fastest activity rate in nearly six years, China’s activity expanded for the sixth month, and Japanese manufacturing growth was the fastest in almost three years.
“So far, momentum is pretty strong heading into 2017,” said Jacqui Douglas, the chief European macro strategist at TD Securities. “But political risks are definitely one of the biggest this year, and given the surprises we had through 2016, it’s really hard to tell what’s in store.”
The dollar rose 0.4% Wednesday, boosted by the stronger-than-expected reading on US employment and solid manufacturing data.
It had suffered its worst January in three decades after US President Donald Trump complained that every “other country lives on devaluation,” while the US sat by “like a bunch of dummies.”
Bruised dollar bulls were also looking to the decision by the Federal Reserve later in the day that was expected to announce the central bank’s intention to raise interest rates a number of times this year.
The S&P 500 and the Dow slipped into the red at midday, ahead of the Federal Reserve’s decision on interest rates.
However, the Nasdaq, which is more technology heavy, was lifted by a 5.6% rise in Apple after the company’s strong earnings and iPhone sales.
“With a bellwether company such as Apple reporting an encouraging set of numbers, it has brought the focus of investors back on company fundamentals,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.
The Dow Jones Industrial Average fell 5.03 points, or 0.03%, to 19,859.06, the S&P 500 lost 4.24 points, or 0.19%, to 2,274.63, and the Nasdaq Composite added 12.03 points, or 0.21%, to 5,626.82.
Both the pan-European FTSE 300 and the STOXX 600 indexes ended up about 0.8%.
The Nikkei added 0.56%, and MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.36% in a largely quiet session.
MSCI’s index of emerging-market bourses rose 0.5%.
That all combined to put MSCI’s 46-country All World index on pace to snap a fourday losing streak, though the recent protectionist noises from Trump’s team kept markets jittery.
US Treasury yields jumped after US data from payrolls processor ADP showed strong jobs gains in January, raising expectations that Friday’s closely watched government employment report will also show strong growth.
Friday’s nonfarm payrolls report is expected to show employers added 175,000 jobs last month.
“ADP just served as a reminder of America’s rosier fundamentals, something that has been pushed off to the side with Washington dominating the spotlight,” said Joe Manimbo, a senior market analyst at Western Union Business Solutions in Washington.
Benchmark 10-year Treasury notes fell 12/32 in price to yield 2.5%, up from 2.45% late on Tuesday.
Brent-crude futures, the international benchmark, edged further above $55 a barrel, supported by signs that Russia and the Organization of the Petroleum Exporting Countries are delivering on promised supply reductions. However, oil prices pared gains after a larger-than-expected buildup in US crude.
Gold fell by 0.6% on the strong dollar and profit-taking from its recent rise.