U.S. stocks rise on economic data
NEW YORK |
NEW YORK (Reuters) - U.S. stocks rose and the U.S. dollar appreciated against other major currencies on Wednesday helped by stronger U.S. economic data and minutes from the Federal Reserve that suggested the U.S. central bank will soon begin withdrawing its huge monetary stimulus.
Stocks also gained worldwide on rekindled investor risk appetite, which had taken a hit from concerns about the swollen debt of Greece and other euro zone countries.
U.S. bonds fell after the Fed said in the minutes from its January Federal Open Market Committee policy meeting it wants to begin selling securities relatively soon as a way to cut back its massive supply of cash to the financial system.
Commodity prices continued their rally though at a slower pace, as the strength in the U.S. currency tends to pressure dollar-denominated commodities.
The U.S. Commerce Department reported earlier on Wednesday that housing starts hit their highest in six months while Federal Reserve data showed industrial output rose a solid 0.9 percent in January, signs that an economic recovery was taking a firm hold as the year began.
The Dow Jones industrial average .DJI closed up 40.43 points, or 0.39 percent, at 10,309.24. The Standard & Poor's 500 Index .SPX ended up 4.64 points, or 0.42 percent, at 1,099.51. The Nasdaq Composite Index .IXIC finished up 12.10 points, or 0.55 percent, at 2,226.29.
U.S. stocks were also boosted by strong results from farm equipment maker Deere & Co (DE.N). The results followed the upbeat trend in fourth-quarter U.S. corporate results, with more than 70 percent of the Standard & Poor's 500 companies beating analyst earnings estimates so far, according to Thomson Reuters data.
MSCI world equity index .MIWD00000PUS rose 0.87 percent, while the pan-European FTSEurofirst 300 .FTEU3 index of top European shares hit a two-week closing high, up 1.3 percent, boosted by financials after BNP Paribas (BNPP.PA) fourth-quarter profits beat forecasts and operational results from ING (ING.AS) pleased investors.
The U.S. dollar extended gains against other major currencies after the Fed minutes with the dollar index .DXY gaining 1 percent at 80.500. The euro fell 1.18 percent at $1.3606 from a previous session close of $1.3768. Against the yen, the dollar rose 1.21 percent at 91.19 yen.
"The minutes are consistent with an economy and financial system that are stabilizing," said Omer Esiner, U.S. Market Analyst at Travelex Global Business Payments in Washington.
"Policy makers seem to be agreeing on a number of issues, such as discount window spreads, which is further evidence conditions are normalizing. From a markets perspective, this is clearly another dollar positive."
However, this concerns investors in government debt because the Fed has been a key pillar of support during the economic downturn.
U.S. bonds fell, with the benchmark 10-year U.S. Treasury note dropping 21/32, with the yield at 3.74 percent.
Housing, which is at the core of the most painful economic downturn since the Great Depression, is crawling out of a three-year slump, supported by government programs. New home construction contributed to economic growth in the third quarter of 2009 for the first time since 2005.
Groundbreaking for new homes increased 2.8 percent to a seasonally adjusted annual rate of 591,000 units while new building permits, which give a sense of future construction, fell 4.9 percent to 621,000 units last month after rising to a 14-month high of 653,000 in December, the Commerce Department said. That compared to analysts' forecasts for 620,000 units.
In Europe, debt markets took a breather from the crisis over debt-stricken Greece after Spain drew a stampede of demand for a government bond issue and Portugal's borrowing costs fell in signs that market fears of sovereign risk in the euro zone may be easing, at least for now.
(Additional reporting by Vivianne Rodrigues; Editing by James Dalgleish)
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