Dow closes high on earnings; dollar flat after Fed chair report

NEW YORK - The Dow Jones Industrial Average Index closed higher on Tuesday, driven by solid earnings from industrial companies, while the dollar index was little changed after reports of Republican senators' support for John Taylor as Federal Reserve chair.

The dollar index rose 0.01 percent, up from an earlier low, as a Bloomberg report on support for Taylor offset diminished hopes for a passage of a major tax cut.

Optimism for a tax overhaul slipped after a CNBC report, citing an aide of Senate leader Mitch McConnell, that 3 GOP Senators may not back the Republican tax bill.

The Bloomberg report also pushed 10-year US Treasury note yields to a more than five-month high. Benchmark 10-year notes last fell 13/32 in price to yield 2.4226 percent, from 2.375 percent late on Monday.

The 30-year US Treasury bond last fell 28/32 in price to yield 2.9348 percent, from 2.89 percent late on Monday.

Earnings from Caterpillar Inc and 3M helped push the Dow Industrials up 167.8 points, or 0.72 percent, to 23,441.76.

The world's largest construction and mining equipment maker, Caterpillar Inc, beat third-quarter profit and sales estimates and raised its full-year forecasts. The Peoria, Illinois company expects revenue in its construction business to surge about 20 percent and its mining business to jump 30 percent. The company's stock gained 5 percent.

3M, another Dow component, which makes a range of products such as autoparts and office supplies, reported upbeat results, helping its stock rise 5.9 percent.

Earnings have gotten off to a strong start, with 73 percent of 120 S&P companies beating profit expectations as of Tuesday.

The S&P 500 gained 4.15 points, or 0.16 percent, to 2,569.13 and the Nasdaq Composite added 11.60 points, or 0.18 percent, to 6,598.43.

European shares ended mixed at their close on Tuesday in anticipation of Thursday's European Central Bank meeting.

"While the ECB is widely expected to announce a reduction, the size and duration of it are still unknown, which could cause a lot of volatility on the day and determine how the euro reacts," said Craig Erlam, a senior market analyst for OANDA in London, in an email.

Although the German, French, Italian and Spanish indexes all rose, the pan-European STOXX 600 closed down 0.4 percent.

The pan-European FTSEurofirst 300 index lost 0.30 percent and MSCI's gauge of stocks across the globe gained 0.03 percent.

Apple supplier and chipmaker AMS jumped 21.8 percent after reporting third-quarter sales just under expectations. Analysts said strong fourth-quarter guidance from the iPhone supplier offset the miss.

Strong profits from Spain's Caixabank also lifted the IBEX 0.4 percent after its Catalonia-related underperformance.

Japan's Nikkei had extended its 16-day winning streak to a 21-year peak overnight following the weekend election win for Prime Minister Shinzo Abe.

The New Zealand dollar hit a 5-month low after the incoming Labour-led coalition government said it plans to review and reform the Central Bank Act to include employment, alongside inflation, as a dual target.

Spot gold dropped 0.4 percent to $1,276.82 an ounce, remaining near a two-week low.

US crude rose 1.08 percent to $52.46 per barrel and Brent was last at $58.34, up 1.69 percent.

source: news.abs-cbn.com

Dollar rallies alongside US yields; bank stocks up

NEW YORK - The US dollar hit an 11-month peak against a basket of currencies on Monday as the risk of faster US inflation and wider budget deficits sent Treasury bond yields shooting higher.

Both the US currency and yields pared some gains in afternoon trading, but continued to point to a new reality in financial markets on expectations of more spending and less regulation when US President-elect Donald Trump takes office in January.

On Wall Street, the Dow Industrials set a record high, led by financial stocks, on bets on higher interest rates and looser consumer protections. Gains in broader indexes were capped by declines in the technology sector.

The dollar traded above the 100 level on an index of the US currency against the world's other major currencies. The euro briefly touched its lowest versus the greenback since last December, while the yen was at its weakest since June.

The greenback has been romping ahead since Trump's win in the US presidential election last week triggered a massive sell-off in Treasuries.

"A lot of the move with the dollar has to do with higher yields," said Christopher Vecchio, currency analyst at FXCM in New York. "It's a seismic moment for markets."

Trump's win also sparked expectations of similar victories in Europe in the coming months. Worries over a rising tide of nationalist sentiment and restrictions on trade across Europe put pressure on the euro, analysts said.

Yields on the U.S. 10-year Treasury notes climbed to their highest since December at 2.302 percent, while 30-year paper climbed above 3.06 percent, also the highest since December. German 30-year yields touched their highest since March, above 1.06 percent, but gave up most of the day's rise.

Benchmark 10-year notes fell 39/32 in price to yield 2.2543 percent, from 2.118 percent on Friday.

The benchmark US yield has risen nearly 40 basis points over the past three sessions and analysts said they see no end in sight for the overall move lower in bond prices and higher in yields.

"I think there's more to go. I think we've topped out as far as the value of bonds," said Tom Simons, money market economist at Jefferies and Co.

"Trump is talking about running an extremely loose fiscal policy, higher spending and lower taxes, and his trade and immigration policies suggest that the labor market is going to get even tighter. All of that adds up to a pretty high inflation environment in the future."

Rising inflation hurts bond prices because it makes their future interest payments worth less.

The market has priced in a 79 percent chance of a 25 basis point rate increase at the upcoming Federal Reserve meeting, scheduled for next month.

WALL ST ENDS LITTLE CHANGED

Bank stocks were the leading force on Wall Street, with the S&P 500 bank index ending at its highest level since March 2008. However, a drop in the biggest tech companies, which also carry the largest market capitalizations, offset the gains and the S&P 500 ended flat.

Investors have been betting technology will look relatively less attractive if Trump lives up to his promise to review regulation in healthcare and financial sectors and to increase government spending on infrastructure to boost economic growth.

"If growth becomes more even and available, we may see a continuation of rotation into lower-valuation, more cyclical businesses and out of high-valuation growth stocks like technology," said James Abate, chief investment officer at Center Asset Management in New York.

The Dow Jones industrial average rose 21.03 points, or 0.11 percent, to 18,868.69, the S&P 500 lost 0.25 point, or 0.01 percent, to 2,164.2 and the Nasdaq Composite dropped 18.72 points, or 0.36 percent, to 5,218.40.

Emerging market stocks fell 1.2 percent and hit their lowest since July and MSCI's gauge of stocks across the globe fell 0.4 percent.

By contrast, Japan's Nikkei jumped 1.7 percent to its highest since February, boosted by the weaker yen.

In commodities, the strong US dollar put pressure on gold, which fell for a third consecutive session despite its appeal as an inflation hedge. Copper rose 0.2 percent after earlier gaining as much as 3.4 percent.

In the oil market, Brent rebounded from three-month lows after a report that OPEC members were seeking to resolve their differences on a deal to cut production ahead of a meeting later this month.

US crude was up 0.8 percent at $43.75 a barrel and Brent last traded at $44.75, flat on the day.

source: www.abs-cbnnews.com