Stock Market News For August 30, 2016

Benchmarks finished higher on Monday, mostly helped by gains in financial stocks. As the case for an interest rate hike had strengthened, thanks to hawkish comments from Federal Reserve Chair Janet Yellen, financial shares moved north. Banks led the gains among the financial companies as higher interest rates tend to widen the difference between what banks charge on loans and what they pay on deposits, which eventually boosts earnings. Meantime, consumer spending rose for the fourth straight month in July.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.

The Dow Jones Industrial Average (DJI) gained 0.6%, to close at 18,502.99. The S&P 500 advanced 0.5% to close at 2,180.38. The tech-laden Nasdaq Composite Index closed at 5,232.33, increasing 0.3%. The fear-gauge CBOE Volatility Index (VIX) tanked 5.8% to settle at 12.85. A total of around 4.9 billion shares were traded on Monday, the lowest volume since Dec. 30. The daily average for this year is about 7.4 billion. Advancers outpaced declining stocks on the NYSE. For 70% stocks that advanced, 27% declined.

Wall Street Eyeing a Rate Hike

At the Jackson Hole economic symposium on Friday, Yellen had said the case for hiking the federal funds rate has gained in strength in “recent months” and that the Fed was close to achieve its goal of full employment and stable prices, while also emphasizing that consumer spending was “solid”.

She added that such encouraging consumer outlays and a job market rebound following a slump in hiring in spring dissipated worries regarding weak economic growth in the first half of the year and global turmoil. According to Fed Vice Chairman Stanley Fisher, Yellen’s speech was “consistent” with the likely two rate hikes this year.

Financial Shares Bounce Back

Thanks to the possibility of a rate hike in the near term, the financial sector which had lagged behind the broader market this year, gained traction on Monday. Banks led the gains among the financial shares as they benefit from a steep yield curve, i.e. when the spread between long-term and short-term rates is wide (read more: 6 Regional Bank Stocks to Buy as Rate Hike Prospects Rise).

Shares of Wells Fargo & Company (NYSE:WFC) (WFC), Bank of America Corporation (NYSE:BAC) (BAC) and Citigroup Inc (NYSE:C). (C) gained 2.2%, 0.3% and 0.3%, respectively, while the broader Financial Services Select Sector SPDR (XLFS) progressed 0.8% (read more: After a Hawkish Yellen, These 4 Financial Stocks are Best Buys).

Consumer Spending Rose in July

Meanwhile, personal outlays rose for the fourth straight month in July. According to the Commerce Department, personal consumption that measures almost anything from hotel stays to hamburgers increased at a seasonally adjusted rate of 0.3% in July from June, a tell-tale sign that domestic consumption will drive economic growth in the second half of this year.

Personal income too rose 0.4% in July. Both the measures were in-line with consensus expectations (read more: 5 Stocks to Buy on Robust Consumer Spending).

Stocks Making Headlines Today

Harris Corp (NYSE:HRS) Announces 6% Rise In Quarterly Dividends

Harris Corporation (HRS) announced that the company’s Board of Directors has approved an increase in the company’s quarterly dividends. (Read More)

AT&T (NYSE:T) Strengthens its DIRECTV Now Portfolio, Adds HBO

AT&T Inc. (T) has inked a deal with HBO that will enable it to deliver Time Warner Inc (NYSE:TWX). (TWX) -owned HBO’s content across multiple platforms. (Read More)

Verizon & Disney Movies Announce New Alliance

Verizon Communications Inc.’s (VZ) Fios by Verizon signed a premium-TV agreement with Walt Disney Co.’s (DIS) cloud-based digital movie service platform. (Read more)

Caterpillar Inks Strategic Alliance with Ritchie Bros

Mining giant, Caterpillar Inc (NYSE:CAT). (CAT) announced that it has entered into a strategic alliance with leading equipment distributor, Ritchie Bros. Auctioneers Incorporated (RBA). (Read More)

Gorman-Rupp’s Patterson Pump Intends to Buy Morrison

Gorman-Rupp Co. (GRC) announced that its subsidiary, Patterson Pump Company has communicated its intention to acquire Florida-based Morrison Pump Company through a letter of intent. (Read More)

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WELLS FARGO-NEW (WFC): Free Stock Analysis Report

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CITIGROUP INC (C): Free Stock Analysis Report

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