Market Snapshot: S&P 500 trades in record territory and Dow, Nasdaq extend post-Fed climb

What’s happening

• The Dow Jones Industrial Average
  DJIA,
  +0.33%
  162 points, or 0.5%, to 36,084.

• The S&P 500
  SPX,
  -0.04%
  added 0.4%, or about 17 points, to 4,727, above a record closing level at 4,712.02 put in on Dec. 10.

• The Nasdaq Composite Index
  COMP,
  -0.69%
  gained 0.3%, or 45 points, to 15,609.

On Wednesday, the Dow rose 383 points, or 1.08%, to 35927, the S&P 500 increased 76 points, or 1.63%, to 4710, and the Nasdaq Composite gained 328 points, or 2.15%, to 15566.

What’s driving markets

Central banks remained in the frame on Wall Street, a day after the Federal Reserve adopted a hawkish stance in its forecasts for interest-rate hikes in 2022 and 2023 while also more aggressively slowing the pace of its bond buying.

The Bank of England on Thursday made a surprising decision for a second month in a row, opting to lift interest rates, and in an 8-to-1 vote increased its benchmark rate to 0.25% from 0.10%. The U.K. government’s worries about the economic impact of the omicron variant of coronavirus, as well as central bank policy makers’ speeches ahead of time, had led traders to expect the BOE would refrain from raising rates in December.

Meanwhile, the European Central Bank, also on Thursday, said it would further slow purchases of assets under its Pandemic Emergency Purchase Program, or PEPP, in the first quarter of next year and bring them to a halt in March. But the ECB left interest rates unchanged.

“The Governing Council judges that the progress on economic recovery and towards its medium-term inflation target permits a step-by-step reduction in the pace of its asset purchases over the coming quarters. But monetary accommodation is still needed for inflation to stabilize at the 2% inflation target over the medium term,” the ECB said in a statement.

“Based on asset price moves during the meeting and after, fear ahead of the FOMC meeting was probably even more exaggerated than we thought,” said Steve Englander, head of global G10 currency research and North America macro strategy at Standard Chartered.

“The initial market reaction does not always stick, but we suspect that both the Fed and investors are satisfied that the Fed is aware of and responding to inflation risks, while taking a measured, data-dependent approach in responding,” said Englander.

Mike Kramer of Mott Capital Management attributed the stock-market rise to the decline in volatility. “The rally in stocks was purely driven by the move lower in the VIX
VIX,
-3.11%,
as implied volatility levels drop. We see this often these days,” he said.

Beyond central bank news, new applications for U.S. unemployment benefits climbed by 18,000 in mid-December to 206,000, but the level remains relatively low after last week when claims fell to the lowest level since 1969.

In addition, the seasonally adjusted annual rate of housing starts rose to roughly 1.68 million in November, marking its highest level since March, according to data from the Census Bureau and Department of Housing and Urban Development. Consensus estimates gathered by FactSet had anticipated a rate of 1.57 million.

Which companies were in focus?

• Lennar LEN late Wednesday reported a surge in profit that missed analyst expectations, in news that could put a recent home builder rally at risk.

• Rubicon, a cloud-based waste and recycling platform operator, is going public by merging with special-purpose acquisition corporation Founder SPAC FOUN, in a deal with an implied pro forma enterprise value of $1.7 billion.

• Delta Air Lines Inc. DAL stock rose 2.1% in Thursday premarket trading after it set its financial goals for the coming years ahead of its scheduled Capital Markets Day.

• Shares of Biogen Inc. BIIB were in focus after the company said it plans to submit a protocol for a Phase 4 confirmatory study for its Alzheimer’s disease drug to U.S. regulators in March. 

• Genuine Parts Company GPC said Thursday its Motion Industries Inc. unit will pay about $1.3 billion for Kaman Distribution Group, a 1,700-employee power transmission, automation and fluid power industrial distributor founded in 1971.

• Emergent BioSolutions Inc. EBS said Thursday that it began dosing participants in a Phase 1 clinical trial for its universal influenza vaccine candidate.

How are other assets faring?

• The yield on the 10-year Treasury note TMUBMUSD10Y edged up less than a basis point to 1.47%. Treasury yields and prices move in opposite directions.

• The ICE U.S. Dollar Index DXY, a measure of the currency against a half-dozen other monetary units, was down 0.5% after Europe’s central bank moves.

• In oil futures, West Texas Intermediate crude CL00, for January CLF23 delivery rose 0.6% higher to trade at $71.28 a barrel.

• Gold futures GC00 for February delivery GCG22 advanced 1.4% to trade at around $1,790 an ounce, as the dollar sinks.

• The Stoxx Europe 600 Index SXXP traded 1.4% higher, while London’s FTSE 100 Index UKX rose 0.9%.

• In Asia, the Shanghai Composite Index SHCOMP closed up 0.8%, while the Hang Seng Index HSI picked up 0.2% in Hong Kong. China’s CSI 300 000300 added 0.5%. Japan’s Nikkei 225 Index NIK rallied 2.1%.