Wall Street indexes rallied yesterday, with the Dow hitting a record above 21,000 points, while the dollar and US Treasury yields jumped as investors bet that a US interest rate hike would come soon.
New York Fed President William Dudley – one of the most influential US central bankers, and usually considered a dove – said late Tuesday that the case for tightening monetary policy had become “a lot more compelling”, while San Francisco Fed President John Williams said he saw “no need to delay” raising rates.
The comments overshadowed US President Donald Trump’s Tuesday night speech to Congress and sent US financial stocks soaring, helping the Dow Jones Industrial Average top 21,000 for the first time as banks’ profits get a boost from higher interest rates.
At 10.29am ET, the Dow was up 254.45 points, or 1.22 per cent, to 21,066.69, the S&P 500 had gained 25.3 points, or 1.07 per cent, to 2,388.94 and the Nasdaq Composite had added 57.20 points, or 0.98 per cent, to 5,882.64.
Gains in mining and bank stocks also took Britain’s blue-chip FTSE 100 index to an all-time high. It last traded up 1.5 per cent, in line with a rise in the FTSEurofirst 300 index.
US Treasury yields rose broadly with two-year yields hitting their highest in more than seven years on increased expectations for a Fed rate hike in March.
Having priced in only around a 35 per cent chance that the Fed would move this month before the Fed comments, investors are now pricing in around a 66.4 per cent probability of a March hike, according to CME Group’s FedWatch tool.
Yields on the two-year Treasury note rose to a high of 1.308 per cent, the highest point since August 2009. Benchmark 10-year notes fell 25/32 in price to yield 2.45 per cent. It earlier rose to 2.471, the highest since February 16.
The dollar index, which measures the greenback against a basket of other major currencies, climbed 0.7 per cent and touched its highest level since January 11 .
French stocks were boosted after controversial right-wing French presidential candidate Francois Fillon, vowed to stay in the race. The decision could strengthen the favorite candidate – centrist Emmanuel Macron – who, polls show, would beat far-right anti-EU leader Marine Le Pen.
The decision helped French stocks, already doing well after strong earnings reports, climb two per cent . The global MSCI ACWI index , was up 0.6 per cent, erasing the previous three days’ losses.
In his speech Mr Trump pledged to overhaul the immigration system, improve jobs and wages and deliver “massive” tax relief to the middle class and tax cuts for companies.
In commodity markets, oil prices edged up as investors took heart from strict Opec compliance with its pledge to cut output, though evidence of increasing US production capped gains.
The stronger dollar weighed on gold , which dropped 0.6 percent to 1,240.99 an ounce, extending Tuesday’s drop.