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A post-Fed Dow turns positive for 2016 as dollar sinks

Published 03/17/2016, 12:46 PM
Updated 03/17/2016, 12:46 PM
© Reuters.  Dow turns positive for 2016, WTI breaks $40, cable sets 5-year record for one-day gain

Investing.com – U.S. stocks traded broadly higher on Thursday and the Dow managed to achieve gains for 2016 a day after the Fed decided to make no move on rates and showed a dovish stance for the removal of accommodative policy even as oil continued its rally, with West Texas breaking $40, and while the dollar sank against major currency rivals.

At 16:35GMT or 12:35ET, the Dow 30 rose 140 points, or 0.81%, while the S&P 500 advanced 14 points, or 0.67%, and the tech-heavy NASDAQ Composite gained 10 points, or 0.22%.

Despite the evident weakness in the greenback as the dollar slipped to 5 month lows and GBP/USD was on track to tally its largest one-day gain since October 2009, stock markets seemed reluctant to react strongly to the dovish stance taken by the Fed which cut its forecast for the number of rate hikes this year in half to just two as market participants continued to weigh what the future holds for U.S. monetary policy.

Fed fund futures predicted that the next hike won’t take place until September, even as Morgan Stanley (NYSE:MS) noted that the possibility of an interest rate increase in June had shrunk to “well below 50%” compared to the more than 50% chance before the meeting.

These experts adjusted their forecast because they believe that core PCE will fall mid-year and thus made a call for just one rate hike in 2016, in December.

JP Morgan ratcheted down its expectations from three hikes to two. Having originally called for a hike in June, September and December, they were now looking for one in July and another in December.

However, the reasoning for the switch from June to July pointed to the fact that they don’t expect the move to be made before the June 23 referendum in the U.K. on its membership in the European Union.

In Thursday’s U.S. macro news, market participants digested labor market indicators with weekly jobless claims rising less-than-expected and the January Job Openings and Labor Turnover Survey showing more available employment than analysts had forecast.

Meanwhile, the Philadelphia Fed survey for March showed that manufacturing activity in the region registered an unexpected expansion.

Additionally, the Conference Board said that February leading indicators tallied a lower increase than forecast as housing prices, stock prices, consumer expectations and new orders continued to show signs of weakness.

Lastly, the current account deficit narrowed in the fourth-quarter, according to data released by the Commerce Department.

Meanwhile, oil prices continued to climb to more than 3-month highs with West Texas breaking through $40 a barrel for the first time since December as the rally in black gold continued after bullish weekly supply data, an agreement by global oil producers to meet next month to discuss an output freeze and a broadly weaker U.S. dollar as a result of a surprisingly dovish Fed all contributed to strong gains.

Crude oil futures on the New York Mercantile Exchange rose 4.03%, to trade at $40.01 a barrel by 16:38GMT, or 11:38AM ET, while Brent oil advanced 2.85% to $41.49.

Of note on news involving Dow components, shares of Caterpillar (NYSE:CAT) managed to stay afloat, rising 1.4%, despite lowering its forecasts for its first quarter earnings. The blue-chip heavy equipment maker did reiterate its full year forecast.

In big moves on earnings, FedEx (NYSE:FDX) rose almost 11% after the worldwide package delivery company, considered a bellwether for the global economy, beat earnings estimates by $0.17 in its fiscal third quarter.

Guess? Inc (NYSE:GES)crashed more than 15% after missing on profit and with annual forecasts.

Williams-Sonoma Inc (NYSE:WSM) slumped about 7% after disappointing earnings-per-share.

In other company news, Office Depot Inc (NASDAQ:ODP) shares were up close to 7% after The New York Post reported that the office supply chain could receive an offer for its corporate business unit.

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