Investors took advantage of the Federal Reserve’s “Santa Clause” hike in interest rates yesterday to pull Wall Street higher.
The 25 basis points rise was seen as a vote of confidence in the US economy.
The Dow Jones industrial average rose 224.18 points, or 1.28 per cent, to 17,749.09, the S&P 500 gained 29.66 points, or 1.45 per cent, to 2,073.07 and the Nasdaq Composite added 75.78 points, or 1.52 per cent, to 5,071.13.
Markets judged the Fed’s statement to be dovish, supportive of risk assets including equities.
“This was a Santa Claus statement,” said John Augustine, chief investment officer at Huntington Wealth & Investment Management in Columbus, Ohio. They Fed “gave savers a little bit more interest, investors a little bit more confidence in the economy, businesses a little bit more expectation of inflation,” he said.
“What caught our attention the most was that it was a hawkish stance and a dovish statement.”
All but one of the 10 major industry sectors of the S&P 500 traded higher, with utilities the largest percentage gainer on a 2.6 per cent advance. Energy fell 0.5 per cent as crude oil prices continued to fall.
“There was a lot of negative positioning going into today in rate-sensitive asset classes,” said Katrina Lamb, head of investment strategy and research at MV Financial in Bethesda, Maryland.
Because of that, she said, it was not surprising that utilities led the S&P 500 gains.
“I’d be surprised to see utilities going on a tear and for months being the outperforming sector,” Lamb said.