Benchmarks settled in the green on Tuesday following a report from Wall Street Journal stating Fed might not raise interest rate sooner-than-expected. Investor sentiment improved when Jon Hilsenrath said the central bank might not amend the words “considerable time” in its guidance for a while, but qualify them. Meanwhile, investors await the outcome of the Federal Reserve’s two-day policy meeting that started on Tuesday to gain further insight into what could possibly be the Fed’s next move. Gains in energy shares due to rise in oil prices also had a positive impact on benchmarks. Further, People’s Bank of China’s decision to provide loans to its biggest banks added to the bullish sentiment.
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The Dow Jones Industrial Average (DJI.V) had hit an intraday record high of 17,167, before gaining 0.6% to close at 17,131.97. The Standard & Poor 500 (S&P 500) posted its biggest one-day percentage gain in four weeks. The index increased almost 0.8% to close at 1,998.98. The tech-laden Nasdaq Composite Index closed at 4,552.76; gaining almost 0.8%. The fear-gauge CBOE Volatility Index (:VIX) went down 9.8% to settle at 12.73. A total of 3.1 billion shares were traded on NYSE on Tuesday. Advancers outpaced declining stocks on the NYSE. For 62% stocks that advanced, 34% declined.
Chief economics correspondent of Wall Street Journal, Jon Hilsenrath’s comments that Federal Reserve will keep interest rate low for some time boosted investor sentiment. He said: “Given the economic backdrop, they don’t want to send a signal right now that rate increases are imminent.” He added: “I think what they do, at the end of the day, is they qualify it.”
Benchmarks were positively impacted due to gains in energy shares. Rising oil prices boosted energy shares. WTI Crude Oil rallied 2.1% to settle at $94.88 per barrel. Key energy stocks such as EOG Resources, Inc. (EOG), Halliburton Company (HAL), Schlumberger Limited (SLB) and Exxon Mobil Corporation (XOM) gained 3.3%, 1.5%, 1.9% and 1.2%, respectively.
Gains in healthcare and utilities shares also lifted the broader market. The Health Care Select Sector SPDR (XLV) was the biggest gainer among the S&P 500 sectors. The sector gained 1.4%. Key healthcare stocks such as Alexion Pharmaceuticals, Inc. (ALXN), Regeneron Pharmaceuticals, Inc. (REGN), Gilead Sciences Inc. (GILD) and Pfizer Inc. (PFE) increased 1.9%, 2.7%, 3.7% and 0.4%, respectively.
The Utilities Select Sector SPDR (XLU) gained 1.3%, the second highest among the S&P 500 sectors. Key utilities stocks such as Duke Energy Corporation (DUK), Southern Company (SO), DTE Energy Company (DTE) and The AES Corporation (AES) increased 1.2%, 1.3%, 1.1% and 1.2%, respectively. Overall, all 10 sectors of the S&P 500 ended in the green.
People’s Bank of China’s decision to provide about $81 billion in loans to its top five banks too led to a late-morning rally. The central bank’s aid came in after China’s August Foreign Direct Investment touched its lowest level in at least two and a half years. According to the Commerce Ministry, China received $7.2 billion in FDI in August, less than 14% a year ago.
On the economic front, the U.S. Bureau of Labor Statistics reported that the U.S. Producer Price Index (PPI.V) for finished goods came in flat during August. The reading was in line with the consensus estimate. Drop in gasoline prices and food costs kept producer prices unchanged in August.
Separately, Apple Inc. (AAPL), Facebook, Inc. (FB) and Yahoo! Inc. (YHOO) were among the most actively traded stocks in the tech-laden Nasdaq. While shares of Yahoo! and Facebook went up 0.4% and 2%, respectively, shares of Apple dropped 0.8%.
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