Benchmarks closed in positive territory on Wednesday following encouraging auto sales data and release of Fed minutes. Better-than-expected auto sales data had a positive impact on auto stocks, which in turn boosted the consumer discretionary sector. Moreover, minutes from Fed’s Dec. 13-14 meeting indicated that policymakers are in favor of a faster pace of rate hikes this year, which in turn boosted investor sentiment.
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The Dow Jones Industrial Average (DJI) increased 0.3%, to close at 19,942.16. The S&P 500 rose 0.6% to close at 2,270.75. The tech-laden Nasdaq Composite Index closed at 5,477.01, gaining 0.9%. The fear-gauge CBOE Volatility Index (VIX) declined 7.4% to settle at 11.90. A total of around 7 billion shares were traded on Wednesday, higher than the last 20-session average of 6.8 billion shares. Advancers significantly outpaced declining stocks on the NYSE. For 83% stocks that advanced, 15% declined.
What Boosted the Benchmarks?
U.S. light-vehicle sales increased from 17.48 million units in 2015 to an all-time record of 17.55 million units in 2016. This is the seventh consecutive year of sales increase. The impressive results were driven by stable fuel prices, high pent-up demand and stronger consumer confidence.
Moreover, auto sales came in at 18.43 million units last month and reached its highest settlement since July 2005. This was also much better than analysts’ expectations of 17.7 million units. December car sales of some of the major automakers, including General Motors Company ( GM), Ford Motor Company (F) and Toyota Motor Corporation (TM) increased 10%, 0.1% and 2.1%, respectively. Shares of General Motors, Ford Motor and Toyota Motor rose 5.6%, 4.6% and 2.2%, respectively.
Gains in automakers led the Consumer Discretionary Select Sector SPDR (XLY) to rise 1.3%, which was the second biggest gainer among the S&P 500 sectors.
Additionally, Materials Select Sector SPDR (XLB) climbed 1.5% and was the best performing sector among the S&P 500. Some of its key components like Dow Chemical Company ( DOW) and LyondellBasell Industries N.V. (LYB) rose 0.8% and 2.2%, respectively. Dow Chemical possess a Zacks Rank #3 (Hold) and LyondellBasell Industries hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Minutes from the Fed’s December meeting indicated that most of the Fed officials agreed “that a gradual pace of rate increases” this year would “be appropriate.” Additionally, some of Fed policymakers said "more expansionary fiscal policy" raised the possibility of "somewhat tighter monetary policy than currently anticipated." The Fed raised interest rates in 2016 for the second time in last ten years. However, policmakers also said “prospect of expansionary fiscal policy had increased the upside risks to economic activity and inflation.”
Stocks That Made Headlines
The impact of challenging retail landscape, stiff competition from online retailers and waning store traffic was clearly evident in the Macy’s, Inc.’s (M) holiday sales results that came below expectations. ( Read More )
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