Dol­lar soars af­ter rate-hike news

Fi­nan­cial stocks rise as in­vestors are ex­pect­ing to gain with the in­crease in the com­ing months.

The Denver Post - - BUSINESS - By Stan Choe

A surge in banks and other fi­nan­cial stocks that stand to ben­e­fit from higher in­ter­est rates pushed in­dexes to the edge of record highs Thurs­day. The dol­lar rose sharply against other cur­ren­cies and the price of gold sank on ex­pec­ta­tions that the Fed­eral Re­serve will fol­low up Wed­nes­day’s rate in­crease with sev­eral more next year.

The Stan­dard & Poor’s 500 in­dex rose 8.75 points, or 0.4 per­cent, to 2,262.03. It made up about half its loss from the prior day, which was its worst in two months.

The Dow Jones in­dus­trial av­er­age rose 59.71 points, or 0.3 per­cent, to 19,852.24. The Nas­daq com­pos­ite rose 20.18 points, or 0.4 per­cent, to 5,456.85. All three in­dexes are within half a per­cent of their record highs.

“I think the mar­ket is just go­ing through a pe­riod of ra­tio­nal ex­u­ber­ance,” says Brian Ja­cob­sen, chief port­fo­lio strate­gist at Wells Fargo Funds Man­age­ment. “The prospect for faster eco­nomic growth and the nor­mal­iza­tion of in­ter­est rates — these aren’t bad things for the stock mar­ket.”

The Fed­eral Re­serve raised short-term in­ter­est rates Wed­nes­day by a quar­ter of a per­cent­age point on the back of a strength­en­ing econ­omy. It was only the sec­ond rate in­crease in a decade, and the Fed in­di­cated three more may be on the way in 2017.

That helped goose the dol­lar’s value, which has been climb­ing against other cur­ren­cies for the past cou­ple years. The ICE U.S. Dol­lar in­dex, which tracks the value of the dol­lar against the euro, Ja­panese yen and four other cur­ren­cies, rose to its high­est level since 2002.

Higher rates can also help banks reap big­ger prof­its from mak­ing loans, and fi­nan­cial stocks jumped 1 per­cent, the big­gest gain of the 11 sec­tors that make up the S&P 500 in­dex.

Bank of Amer­ica rose 49 cents, or 2.2 per­cent, to $23.16, and Zions Ban­corp. gained 84 cents, or 2 per­cent, to $43.04.

Stocks that pay big div­i­dends lagged be­hind the rest of the mar­ket on fears that higher in­ter­est rates will push in­come in­vestors away from them and back into bonds. Real-es­tate stocks in the S&P 500 fell 0.7 per­cent.

The yield on the 10-year Trea­sury note rose to 2.60 per­cent from 2.57 per­cent late Wed­nes­day and reached its high­est level in more than two years. The two-year Trea­sury yield held steady at 1.27 per­cent.

Higher yields mean newly is­sued bonds pay higher in­ter­est, but they also pull down prices of ex­ist­ing bonds sit­ting in in­vestors’ port­fo­lios and bond funds.

Roughly four stocks rose for ev­ery three that fell on the New York Stock Ex­change, and nine of the 11 sec­tors that make up the S&P 500 in­dex rose.

Eli Lilly was one of the top-per­form­ing stocks in the in­dex af­ter ris­ing $3.70, or 5.5 per­cent, to $71.37. The drug­maker gave a stronger-than-ex­pected profit fore­cast for next year.

Pier 1 Im­ports surged $2.09, or 32.3 per­cent, to $8.57 af­ter re­port­ing stronger-thanex­pected earn­ings for the lat­est quar­ter and raised its fore­cast for full-year re­sults.

The worst-per­form­ing stock in the S&P 500 was Ya­hoo, which fell $2.50, or 6.1 per­cent, to $38.41 af­ter dis­clos­ing a breach that af­fected more than a bil­lion user ac­counts, the largest such at­tack in his­tory.

Gold dropped to its low­est price in 10 months. Higher in­ter­est rates of­ten hurt the price of gold, which in­vestors tend to flock to when they’re wor­ried about the prospect of higher in­fla­tion and too-low in­ter­est rates. Gold fell $33.90, or 2.9 per­cent, to set­tle at $1,129.80 per ounce.

Silver fell $1.26 to set­tle at $15.96 an ounce, and cop­per dipped by less than a penny to $2.60 per pound.

Bench­mark U.S. crude slipped 14 cents to set­tle at $50.90 a bar­rel on the New York Mer­can­tile Ex­change. Brent crude, the in­ter­na­tional stan­dard, rose 12 cents to $54.02 a bar­rel in Lon­don.

Nat­u­ral gas fell 10.6 cents to $3.434 per 1,000 cu­bic feet, and whole­sale gaso­line rose to $1.54 per gal­lon.

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