Stocks rebounded on Thursday after a knee-jerk selloff late Wednesday tied to the Federal Reserve's rate hike outlook.
The S&P 500 0.53%, the Dow Jones Industrial Average gained 0.46%, and the Nasdaq rose 0.47%. The Dow was back on track to smash the never-before-seen 20,000 level, trading just 100 points below the milestone.
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.
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 turned lower on Thursday 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.
West Texas Intermediate crude fell 1.1% to $50.49 a barrel on Thursday.
Eli Lilly (LLY) - Get Report rose 3.4% 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.
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.
Yahoo! (YHOO) tumbled 2.5% on Thursday after the Internet company disclosed that another 1 billion Yahoo! accounts were hacked. 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. The hacks come at an inopportune time for Yahoo!, which is currently working to close its $4.8 billion sale to Verizon (VZ) - Get Report .
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.