Wall St. gains on financials boost
NEW YORK — US stocks rose on Wednesday as gains in financial shares were powered by growing expectations for a December interest rate hike and on hopes President Donald Trump’s administration may be making progress on a tax plan.
New orders for US-made capital goods increased more than expected in August and shipments maintained their upward trend, pointing to underlying strength in the economy. The data, coupled with comments from Fed Chair Janet Yellen on Tuesday boosted anticipation the Federal Reserve would raise US interest rates in December, lifting yields on US Treasuries, which in turn pushed financials up 1.30%.
“With rates going up, that is why banks move. If rates go up and are sustainable they can start to make some money,” said Thomas Martin, senior portfolio manager at GLOBALT Investments in Atlanta, Georgia.
Mr. Trump proposed the biggest tax overhaul in three decades but offered scant details about how to pay for the cuts without dramatically driving up federal deficits. If passed, the plan would be Mr. Trump’s first significant legislative win since taking off ice in January.
“For the first time since we have had Trump and the administration in office, it looks like there is incrementally more of a possibility of tax reform going through that would actually be meaningful,” Mr. Martin said.
The Russell 2000 index of smallcap stocks rose 1.92% and notched its best day since early March. Small-cap names are likely to be the biggest beneficiaries of a tax cut.
Traders now see about a 78% chance of a December rate hike, compared with roughly 73% a week ago, according to CME Group’s FedWatch tool.
Bank of America rose 2.42% and Goldman Sachs gained 2.10% as the biggest boost to the Dow.
The Dow Jones Industrial Average rose 56.39 points or 0.25% to 22,340.71, the S&P 500 gained 10.20 points or 0.41% to 2,507.04 and the Nasdaq Composite added 73.10 points, or 1.15%, to 6,453.26.
Interest- rate- sensitive and dividend-paying sectors declined. The consumer staples index fell 0.73% while utilities dropped 1.34% and real estate lost 0.84%.
Also serving to cap gains on the Dow and S& P were Nike shares, which declined 1.92% after the firm posted its slowest quarterly sales growth in nearly seven years and said it expected a further drop in revenue from North America.
Advancing issues outnumbered declining ones on the NYSE by a 1.29-to-1; on Nasdaq, a 2.71-to1 ratio favored advancers. About 6.55 billion shares changed hands in US exchanges, compared with the 5.91 billion daily average over the last 20 sessions. —