S&P breaches 2,700 mark, Dow jumps
MoneyGram tumbles after deal with Ant Financial collapses Oracle, IBM rise after rating upgrades
NEW YORK: The benchmark S&P 500 breached the 2,700-mark for the first time shortly after open yesterday, while the Nasdaq and the Dow hit records on a strong run in technology stocks. Oracle and IBM rose about 3 percent following brokerage upgrades, helping the S&P technology index gain about 1 percent.
US stocks kicked off 2018 on a strong note on Tuesday, with the S&P 500 and the Nasdaq closing at record levels. “The sentiment is very much positive. We had a strong start and we are likely to see a follow through in the near-term,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
At 9.39 am ET (1439 GMT), the Dow Jones Industrial Average was up 30.89 points, or 0.12 percent, at 24,854.9 and the S&P 500 was up 4.61 points, or 0.17 percent, at 2,700.42. The Nasdaq Composite was up 21.37 points, or 0.3 percent, at 7,028.27. However, gains in the technology sector were limited by a 2 percent drop in Intel following a report that its processor chips had a fundamental design flaw. Rival chipmaker Advanced Micro Devices was up about 5 percent. Other chipmakers Nvidia and Micron were also higher. The Federal Open Market Committee is set to release minutes from its December meeting, when the central bank raised interest rates for the third time in 2017. Investors will parse the minutes, due at 2 pm ET, for hints on rate tightening action in the coming months and the impact of the US tax overhaul on the economy and inflation.
The odds of a March rate hike are at 56.3 percent level, according to the CME Group’s Fedwatch tool.
“There’s a lot more mystery surrounding the Fed. We see the Fed as being somewhat more hawkish in 2018, but this is the time when the risks of the policy are really starting to increase,” Brown said.
In other stock moves, Scana Corp was up more than 23 percent after Dominion Energy said it would buy the utility in an allstock deal $7.9 billion deal.
MoneyGram International fell about 10 percent after Alibaba-owned Ant Financial’s plan to acquire the US money transfer company in a $1.2 billion deal collapsed due to national security concerns. Harley-Davidson slipped 3.5 percent after brokerage Longbow Research downgraded the company’s stock to “underperform”.
Advancing issues outnumbered decliners on the NYSE by 1,587 to 988. On the Nasdaq, 1,402 issues rose and 1,055 fell. Euro area borrowing costs edged lower yesterday, stabilizing as a sweeping reform of EU financial market rules took effect a day after hawkish comments by ECB ratesetters drove a bond market sell-off. The yield on Germany’s 10-year government bond, the benchmark for the region, was down 3 basis points at 0.437 percent, recovering from two-month highs it held on to for much of the morning session.
The gap with its Italian counterpart tightened to 160 basis points, as Italy’s own 10-year borrowing costs dropped 6 bps to 2.03 percent. Most core eurozone bond yields were down 1-4 bps on the day. Analysts said that a significant bond redemption in Germany helped explain the fall in yields. “We’ve come a long way down in prices and we had a redemption in Germany, so there many have been some cash being put back to work,” said Orlando Green, European fixed income strategist at Credit Agricole. Ireland was expected to kick off a very busy supply month for eurozone bonds with the launch of a 10-year syndicated issue later yesterday for between 3-4 billion euros.
European stock and bond volumes were generally light after major new securities regulations came into force, although traders said there was little in the way of serious disruption. Under the new MiFID II - or Markets in Financial Instruments Directive II - rules, trades in financial assets and instruments must all be logged in a repository, forcing banks, asset managers and traders to report detailed information on trillions of euros of transactions.
Fixed income volumes were lower at 1000 GMT compared to their average at that time over the previous 30 days, according to data provider Trax, a subsidiary of MarketAxess that tracks around 65 percent of all secondary market deals. The new regulatory regime was delayed by a year due to its complexity, and regulators have had to issue eleventh-hour guidance to banks and financial firms to avoid trading freezes as well as calming the nerves of those not yet fully compliant.
Strategists said they expected investors to refrain from making large trades until they had a clearer sense of the impact of the reform. Bond investors were also keeping a close eye on the US Federal Reserve’s December meeting minutes and USISM PMI manufacturing data, both due later in the day.