U.S. stocks climbed for a third day as investors await what is widely expected to be the first Federal Reserve interest-rate increase in almost a decade.
Leadership shifted Wednesday as crude oil retreated and energy slumped after two sessions out in front. Industrials paced early gains, with Honeywell International Inc. up 4.5 percent after its 2016 earnings forecast beat some analysts’ estimates. Homebuilders rose after housing starts were stronger than forecasts. Equities earlier trimmed their climb as crude extended a drop after weekly inventory data showed stockpiles remain ample.
The Standard & Poor’s 500 Index gained 0.2 percent to 2,047.55 at 11:48 a.m. in New York, after rising as much as 0.8 percent. The gauge’s advance faltered near its average price during the past 50 days. The Dow Jones Industrial Average climbed 16.46 points, or 0.1 percent, to 17,541.37. The Nasdaq Composite Index rose 0.2 percent. West Texas Intermediate crude futures lost 4.4 percent after rising almost 5 percent during the two prior sessions.
The Federal Open Market Committee is poised to boost rates today for the first time since 2006, ending a campaign of stimulus that helped stoke what could become the second-longest American rally on record next year. Fed officials will announce their rate decision at 2 p.m. in Washington, and traders are pricing in a 76 percent chance of liftoff.
Barring a shock decision, investors are about to find out how much stocks are worth in the absence of Fed support that has helped restore $15 trillion to share values since 2009. History suggests two immediate consequences from tightening: higher volatility and lower valuations, meaning earnings and ultimately the economy are left to drive prices.
The S&P 500 fell in seven of eight sessions, losing 5.7 percent after the Fed balked at raising rates in September, citing a threat to global growth amid a slowdown in China and turmoil in financial markets. By mid October, traders priced in less than 30 percent chance of a rate increase this year while equities headed for their strongest monthly gain since 2011. Odds jumped to nearly 70 percent after a stronger-than-forecast October jobs report on Nov. 6.
A report today showed new-home construction rebounded in November, led by gains in single-family dwellings that signal the residential real estate industry will continue to support growth. Work began on the most stand-alone houses since January 2008, and permits for similar projects reached an eight-year high. A separate gauge showed manufacturing stagnated in last month, held back by less production of durable goods such as automobiles and metals that reflects weak global demand.
The S&P 500 capped its first back-to-back gains in more than a month yesterday. Prospects for the first U.S. rate increase and a deepening oil rout had sparked a selloff in riskier assets, putting the benchmark on track for its worst December in 13 years. The equity gauge has slipped 3.9 percent since a May record, and is poised for its biggest annual drop since 2008.
The Chicago Board Options Exchange Volatility Index, fell 4 percent Wednesday to 20.12, extending its decline this week to almost 18 percent. The measure of market turbulence known as the VIX surged 65 percent last week, the most since a record monthly jump in August.
Seven of the S&P 500’s 10 main industries rose, with utilities up 1.7 percent and phone companies rising 1.3 percent. Energy, materials and technology shares lagged.
Source : Bloomnberg