US close: Stocks end at fresh records as retailers impress
US stocks closed at all-time highs on Tuesday, with retailers providing some cheer after well-received earnings, as investors digested the latest comments by Federal Reserve officials.
The Dow Jones Industrial Average and the S&P 500 rose 0.6% to end at 20,737.83 and 2,365.12, respectively, while the Nasdaq Composite closed up 0.5% to 5,865.95.
Oil prices ticked higher and the dollar gained ground on the back of hawkish Fed speak.
West Texas Intermediate was up 0.6% to $54.37 a barrel and Brent crude was 0.9% firmer at $56.68.
Philadelphia Fed president Patrick Harker said he would support an interest hike in March if there was evidence of price pressures on inflation and in the employment costs index.
However, Minneapolis Fed president Neel Kashkari said that the labour market has “more to run”, suggesting that interest rates should not be raised quickly.
Craig Erlam, senior market analyst at Oanda, said that the dollar was boosted by an increase in hawkish commentary from Fed officials which has forced investors to re-evaluate their expectations for the March meeting.
“Expectations for a rate hike at the meeting remain quite low but they have picked up considerably and recent comments from Patrick Harker who claimed a rate hike in March is not off the table - echoing similar views of other officials including chair Janet Yellen last week – are driving these moves.”
A strong showing from the retail sector helped to underpin the overall tone.
Home Depot rose after its fourth-quarter sales and earnings came in ahead of analysts’ expectations, while Macy’s gained as the department store beat earnings expectations but fell short on revenue and said it will cut its store count.
Wal-Mart Stores was also in the black after it topped fourth-quarter earnings forecasts.
Apple advanced after Morgan Stanley reiterated the technology giant’s ‘overweight’ rating and lifted the price target to $154.
On the downside, US-listed shares of HSBC slumped after the bank delivered a reported profit before tax for 2016 of $7.1bn that was down 62% on the prior year.
Kraft Heinz shares were also weaker as investors in the US got their first chance to react to news over the weekend that it has abandoned its takeover plans for London-list consumer goods group Unilever.
On the data front, Markit’s flash US composite output index – which measures activity in the services and manufacturing sectors – fell to 54.3 in February from 55.8 the previous month. Still, this was above the 50 mark that separates contraction from expansion for the twelfth consecutive month.
Meanwhile, the index for services business activity declined to a two-month low of 53.9 from 55.6 in January, undershooting consensus estimates for a reading of 55.8.The manufacturing index printed at 54.3 from 55.0 the month before, missing expectations for a reading of 55.3.