Financials set for best day since November, leading market rally

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Data that signalled the US economy is in the pink of health and bolstered the case for a rate rise by the Federal Reserve this month, helped put financials on track for their biggest one day jump in nearly four months and carried US stocks deeper into record territory.

The S&P 500 banks sector was up 3.2 per cent on Wednesday on track for its biggest one day gains since November 14. Meanwhile, the broader S&P 500 financials index climbed 2.6 per cent — on track for its best day since November 10 — and taking the sector’s year-to-date gains to 7.9 per cent.

The energy sector clocked the second biggest gain on the S&P 500 rising 2 per cent.

That helped push the S&P 500 up 1.2 per cent to 2,392.96, while the Dow continued its climb past the 21,000 level it struck earlier on Wednesday, rising as much as 1.2 per cent to 21,0976.46. Meanwhile, the Nasdaq Composite rose 1.1 per cent to 5,888.66.

The moves came as a gauge of US factory activity hit the highest level since 2014 showing manufacturing has regained momentum. Separately, data also showed the Fed’s preferred inflation measure approaching its 2 per cent target the odds of a rate rise, following hawkish remarks from two Fed speakers on Tuesday, and bolstering the case for a rate rise this month. Higher rates are better for bank’s net interest margin — the difference in the rates they charge on loans and their own funding costs.

The risk-on sentiment was also driven by after president Donald Trump struck a more conciliatory tone during his remarks to a joint session of Congress on Tuesday and revived the “America First” themes of his inauguration.

“The mood in markets in general is upbeat as President Donald Trump’s address to a joint session of Congress didn’t provide anything to cause market angst (though it didn’t provide much by way of details of any of the Administration’s economic policies either) nor did it derail the rising expectations for a Fed move sooner rather than later,” David Rosenberg at Gluskin Sheff, said.

Meanwhile, US Treasuries continued to sell-off with the yield on the US 10-year Treasury note, which moves inversely to price, rising 7.2 basis points to 2.46 per cent.

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