US close: Wall Street rises on strong jobs and housing data

Wall Street closed on a high note as investors largely shrugged off Fed chair chair Janet Yellen's speech which appeared to all but confirm a December rate hike was in the offing.

The Dow Jones Industrial Average edged higher by 0.19% or 35.68 points to end at 18,903.82 points, while the S&P 500 rose by 0.47% to 2,187.82 points, and the Nasdaq climbed 0.74% to 5,333.97.

Testifying before the joint economic committee on Capitol Hill, Federal Reserve chief Janet Yellen said that "at its last meeting the FOMC had judged that the case for an increase in the target range [for the Fed funds rate] had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee's objectives."

The Fed expects the growth of the US economy “will warrant only gradual increases in the federal funds rate over time to achieve and maintain maximum employment and price stability," she added.

Yields on the benchmark 10-year Treasury note were six basis points higher at 2.28% by the closing bell, while those on two-year notes were down by one basis point at 1.03%. At 90.6%, according to Fed funds futures the odds of a December rate hike were unchanged from the previous session.

Neil Wilson, market analyst at ETX Capital, said “the fact is a December rate hike has already been priced in – markets think there is a roughly 90% chance the Fed will increase the target federal funds rate. It now looks almost impossible for the Fed not to raise rates next month – it’s painted itself in a corner and has to respond with a hike or all hell will break loose in the markets.

“Today’s jobless numbers – showing unemployment at a four-decade low – only strengthens the case for the Fed to act. Rising bond yields since Donald Trump’s win further add to the argument for the central bank to raise rates. Longer term, Trumpflation may not be all it’s cracked up to be as a savings glut exists globally.

“The dollar is trading just shy of its highest level in 13 years, while the pound is trading virtually unchanged against the greenback.”

Barrage of stronger-than-expected economic data

On the date front, the Labor Department revealed that initial jobless claims dropped 19,000 from the previous week to 235,000, better than the expected rise to 257,000. This was the lowest number of Americans filing for unemployment benefits in 43 years.

In parallel, the Bureau of Labor Statistics said that the consumer price index increased 0.4% in October after rising 0.3% in September, which was in-line with analysts´ expectations.

Over the 12 months to October, the index was ahead by 1.6%, its highest year-on-year reading since October 2014.

The Commerce Department said that housing starts rose more than expected in October, surging 25.5% from the revised September figure to a
seasonally-adjusted rate of 1.32m. This was a nine-year high and surpassed expectations for an increase to 1.15m.

Oil futures edged up, West Texas Intermediate was higher by five cents to $45.42.

In corporate news, shares in Wal-Mart fell 3.08% as the retail behemoth’s third-quarter revenue rose less than expected and profit fell.

Revenue was up 0.7% to $118.2bn, below expectations for $118.69bn, while profit dropped to $3.03bn, or 98 cents a share, compared with $3.3bn and $1.03 a year ago, but above projections of 90 cents to $1.

However, Best Buy’s shares surged 14% as the electronics retailer’s fourth-quarter revenue rose above forecasts.

Revenue grew 1.4% to $8.95bn, above expectations of $8.4bn and profit increased to $194m, or 60 cents a share, from $125m or 37 cents last year.

From a sector standpoint the strongest performance was put in by the following industrial groups: Forestry&Paper (2.76%), Gambling (2.57%) and Airlines (2.47%).

Dow Jones - Risers

Home Depot Inc. (HD) $128.92 2.87%
Nike Inc. (NKE) $51.59 1.80%
Microsoft Corp. (MSFT) $60.64 1.66%
Goldman Sachs Group Inc. (GS) $209.63 1.63%
Visa Inc. (V) $81.07 1.24%
JP Morgan Chase & Co. (JPM) $78.02 0.80%
Intel Corp. (INTC) $35.02 0.52%
3M Co. (MMM) $172.78 0.44%
E.I. du Pont de Nemours and Co. (DD) $69.17 0.42%
International Business Machines Corp. (IBM) $159.80 0.32%