Dow Heads for 20,000 as Stocks Rise, Gold Falls Ahead of Fed

EghtesadOnline: Global stocks advanced, sending the Dow Jones Industrial Average within 50 points of 20,000 on speculation that the Federal Reserve’s expected rate increase is a signal of confidence that the economy is strengthening. The dollar and Treasuries were little changed.

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13 December 2016

IBM Corp. and Intel Corp. led gains in the blue-chip index as it heads for a fresh record and the round-number milestone. The gauge has rallied 8.5 percent since the Nov. 8 election and now trades almost 7 percent higher than its average price for the past 50 days. Its relative-strength index stood at the highest level in two decades, a signal to technical analysts that the surge may have gone too far too soon, Bloomberg reported.

European stocks reached an 11-month high as Italy’s largest lender laid out plans to raise capital. Treasuries stabilized with the 10-year yield holding below 2.50 percent for a second day, while the dollar was little changed versus major currencies as the Fed begins a two-day policy meeting. Oil was set for its highest close since July 2015.

Speculation that fiscal easing in the U.S. will drive growth is pushing investors into stocks as governments take the baton from central banks that are starting to scale back a decade of stimulus. With the market assigning 100 percent odds to a Fed rate hike Wednesday, investors are focusing on the path for 2017, and see a two-in-three chance of additional tightening by June.

“There is a strong performance across all equity markets at the moment,” said Andrzej Pioch, who helps oversee $1.3 billion as a money manager at Legal & General Investment Management Ltd in London. “In European stocks there has been a reaction to more clarity coming from Italy. The hike tomorrow is largely priced in.”

Stocks

The S&P 500 rose 0.8 percent to an all-time high on a closing basis at 1:44 p.m. in New York, while the Dow climbed 145.18 points to 19,941.61. The Nasdaq 100 Index advanced to its first record since October, while small caps rebounded from a 1 percent drop on Monday.

Exxon Mobil Corp. rose 2.2 percent after Donald Trump nominated CEO Rex Tillerson to lead the State Department.

The Stoxx Europe 600 Index advanced 1.1 percent to the highest since January, led by a surge in Mediaset SpA after Vivendi SA said it may buy a 20 percent stake in the broadcaster. UniCredit was the second-biggest gainer with a 8.7 percent advance.

Banca Monte dei Paschi di Siena SpA climbed after a European Union official said the lender may be eligible for a precautionary recapitalization if efforts to plug the private sector fail.

Emerging market shares rose 0.6 percent for the fifth gain in seven sessions.

Currencies

The yen weakened 0.3 percent to 115.31 per dollar, following Monday’s 0.3 percent climb. The euro fell 0.1 percent to $1.0620.

The pound gained against all of its Group-of-10 peers as a report showed inflation accelerated to the highest level in more than two years.

Bonds

Italian bonds gained for a second day, with the yield on 10-year bonds falling nine basis points to 1.90 percent.

Yields on Treasury notes due in 10 years were at 2.48 percent. Long-dated Treasuries outperformed as demand rebounded at an auction of 30-year notes, while yields on shorter maturities were steady ahead of the Fed decision.

Commodities

Brent crude erased gains to trade at $55.66 a barrel, while West Texas Intermediate oil added 0.2 percent to $52.95. The International Energy Agency said Tuesday global oil markets will swing from surplus to deficit in the first half of 2017 as OPEC and other producers follow through on an agreement to cut supply.

Nickel climbed 1.5 percent $11,465 a ton, and copper fell to a one-week low as stockpiles tracked by the London Metal Exchange posted the biggest two-day gain since June. Gold traded near a 10-month low as investors prepared for the first U.S. rate increase in a year.