Stocks moved modestly higher on Thursday after a knee-jerk selloff late Wednesday tied to the Federal Reserve's rate hike outlook.
The S&P 500 was up 0.46%, the Dow Jones Industrial Average gained 0.38%, and the Nasdaq rose 0.4%. The Dow was back on track to reach the psychologically important 20,000 level, trading less than 200 points from the milestone. The intraday high Thursday was 19,951.
The Fed raised its forecast on Wednesday to show three likely rate hikes in 2017, up from two previously predicted, following its two-day meeting. The Fed kept its forecast for three hikes in both 2018 and 2019. The central bank also opted to hike interest rates by 25 basis points in a unanimous decision, putting the fed funds rate at 0.5% to 0.75%. The accelerated expected pace of hikes was a shock to markets, though the December rate was hike wasn't.
Equities pulled lower on the Fed's outlook on Wednesday. The S&P 500, Dow and Nasdaq each moved lower, retreating from records set on Tuesday. The Dow snapped a seven-session streak of record closes.
But few are betting on further losses before the end of the year, technical analyst Helene Meisler of Real Money, our premium site for active traders, noted. "It's still clear to me no one thinks the market can go down much between now and year's end," Meisler wrote in her latest analysis. (Click here to read Meisler's full take).
Financials led the markets higher on Thursday in celebration of higher rates. Banks including JPMorgan (JPM) - Get Report , Bank ofAmerica (BAC) - Get Report and Wells Fargo (WFC) - Get Report moved higher, while the Financial Select Sector SPDR ETF (XLF) - Get Report added 1.1%.
Just as the Fed opted to raise rates, the Bank of England decided to leave rates unchanged at its own policy meeting on Thursday morning. England's central bank kept its key interest rate unchanged at 0.25%, as economists had expected. The BOE also held its asset purchase program at 435 billion pounds (or $543 billion). The vote was unanimous among the nine central bank members.
U.S. consumer prices hit their highest level in two years, underscoring the Fed's need to normalize monetary policy to deal with inflationary pressures. The U.S. consumer price index rose 0.2% in November, according to the Bureau of Labor Statistics. The rise was as expected after increasing 0.4% in October. Consumer prices rose 1.7% over the past 12 months, the highest level since late 2014, and trending toward the Fed's 2% target.
Jobless claims declined by 4,000 to 254,000 in the past week, the Department of Labor reported on Thursday. The number of new claims for unemployment benefits was expected to drop at a slower pace to 255,000. The less volatile, four-week average rose by 5,250 to 257,750.
Manufacturing activity in the New York region improved in December. The Empire State Manufacturing Index rose by 7.5 points to a reading of 9 in early December. Manufacturing in Philadelphia also improved with the survey jumping to 21.5 in December, up 7.5 points. A flash reading of the PMI Manufacturing Index increased to 54.2 in December from 53.9.
Homebuilder sentiment surged to its best level in more than a decade as confidence enjoyed a post-election increase. The National Association of Home Builders' Housing Market Index climbed to a reading of 70, far better than an expected unchanged reading of 63. Builders expressed hope that "President-elect Trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability," the NAHB wrote in a statement.
Crude oil prices fell on Thursday afternoon after big swings tied to a production cut agreement among major oil-producing nations. The Organization of Petroleum Exporting Countries, which agreed to reduce output at a late November meeting, has emphasized that it would need non-OPEC cooperation to push crude prices higher. Non-OPEC members, including Russia, agreed to cut production by 558,000 barrels a day at a meeting over the weekend. OPEC restrictions go into effect in January. However, there are concerns that some countries may find it difficult to adhere to restrictions with production currently at record highs.
There is "a wide spread of opinions over just how soon the global oil market will rebalance, with the consensus roughly matching Wednesday's assessment from Saudi Oil Minister Khalid Al-Falih that it could take "several months" to see the impact of OPEC cuts," Tim Evans, energy futures specialist at Citi, wrote in a note.
West Texas Intermediate crude settled 0.3% lower at $50.90 a barrel on Thursday.
Yahoo! (YHOO) tumbled on Thursday on reports its latest data breach could encourage Verizon (VZ) - Get Report to scrap its deal to buy the Internet company or request a discount from the $4.8 billion offer accepted. Yahoo! disclosed that another 1 billion Yahoo! accounts were hacked on Wednesday evening. The new breach came on top of the 500 million hacked accounts that were previously disclosed in what Yahoo! says were likely two unrelated events.
Eli Lilly (LLY) - Get Report rose after guiding for a better-than-expected fiscal 2017. The company anticipates full-year earnings of $3.51 to $3.61 a share. Lilly's adjusted earnings outlook of $4.05 to $4.15 a share came in above consensus of $3.96. The drugmaker also reiterated its fiscal 2017 adjusted earnings guidance of $3.50 to $3.60 a share. Analysts anticipate $3.52 a share.
AthenaHealth (ATHN) - Get Report surged 25% after offering positive guidance for fiscal 2017. The company anticipates revenue between $1.29 billion and $1.33 billion, meeting analysts' estimates of $1.29 billion. Adjusted operating income is expected to come in between $170 million and $190 million, far higher than an anticipated $154 million.
Delta (DAL) - Get Report climbed 3% after increasing its fourth-quarter operating margin guidance to 10.5% to 11%, up from its previous range of 9.5% to 10.5%. The airline also said it would restrict 2017 capacity growth at 1%. Fuel prices next year are expected to be higher for the first time since 2014.
Pier 1 Imports (PIR) - Get Report roared nearly 22% higher after increasing its guidance for its current quarter and naming Chairman Terry London as interim CEO to take over from departing CEO Alex Smith at the beginning of 2017. The home decor retailer also beat analysts' profit estimates in its recent quarter, earning an adjusted 22 cents a share, above forecasts of 13 cents. The company said sales trends rebounded in late November following the election.
Mondelez (MDLZ) - Get Report rose 4.5% on reports that Kraft Heinz (KHC) - Get Report was close to a deal to buy the maker of Oreo cookies. Swiss magazine Bilanz reported Wednesday that Kraft Heinz, backed by shareholder 3G Capital, were close to a deal to take over Mondelez, though a Reuters report countered that Mondelez had not been contacted by Kraft.
21st Century Fox (FOXA) - Get Report formalized a deal to buy Sky on Thursday, offering a buyout of 10.75 pounds a share, a 40% premium for the news company. The media conglomerate anticipates the acquisition will close by the end of 2017.