U.S. stocks higher after strong ISM services, Italian referendum

Wall Street traded higher with the Dow hitting a new record intraday high at 19,274.85 points on Monday as investors digested confirmation of the strength in the U.S. service sector and shrugged off the defeat of the Italian referendum for constitutional reform.

At 11:13AM ET (16:13GMT), the Dow Jones gained 94 points, or 0.49%, the S&P 500 rose 15 points, or 0.70% while the tech-heavy Nasdaq Composite traded up 56 points, or 1.07%.

U.S. equity took the Italian voters’ rejection of a constitutional referendum and the subsequent resignation of Prime Minister Matteo Renzi in stride on Monday.

The outcome was largely priced in to stocks, with only the FTSE MIB in red among European indices. Italian banks also suffered over worries that the defeat could thwart plans to raise capital.

The euro had dropped to a 20-month low against the dollar in a knee-jerk reaction but quickly recovered on Monday to hit its highest level since mid-November.

Stateside, market participants celebrated the continued expansion in the service sector with activity hitting a one-year high.

In a report, the Institute of Supply Management (ISM) said its non-manufacturing purchasing manager’s index (PMI) rose to 57.2 last month from 54.8 in October. That was the 82nd consecutive month of growth and its highest reading since October 2015.

Analysts had only expected the index to increase to 55.4.

The data was just another piece of the economic puzzle lending support for the Federal Reserve (Fed) to move ahead with a rate hike at its December 13-14 meeting.

Fed fund futures have priced in policy tightening at the end-of-the-year decision with investors already looked forward to the second hike in 2017. Odds for another increase in June stood at 58.5%, according to Investing.com’s Fed Rate Monitor Tool, markets priced in the odds of a rate hike at 100%.

Meanwhile, New York Fed president William Dudley said on Monday that he would favor monetary policy becoming “somewhat less accommodative over time by gradually pushing up the level of short-term interest rates.”

While Dudley recognized that markets could be correct that the Fed would tighten policy quicker than originally anticipated on the back of speculated fiscal policies from incoming President Donald Trump, he insisted that there was still “considerable uncertainty” and that he preferred to wait for greater clarity over the coming year.

Dudley has a vote on policy decisions and is also generally considered to be the policymaker most closely aligned with Fed chair Janet Yellen’s views.

Chicago Fed president Charles Evans showed a more dovish stance on Monday, insisting that wage growth was slow and inflation was still too low, suggesting he may be more patient on the gradual tightening of interest rates.

Though Evans does not have a vote on policy decisions this year, he will be entering the rotation in 2017.

St. Louis Fed chief and voting member James Bullard will speak on the U.S. economy and monetary policy at 2:05PM ET (19:05GMT).

Risk-on trade put downward pressure on safe haven gold Monday with the precious metal falling more than 1% and hitting levels not seen since February.

That was despite weakness seen in the greenback. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.30% at 100.45 by 11:15AM ET (16:15GMT).

Meanwhile, oil prices climbed to levels not seen in more than a year on Monday, building on last week’s rally triggered by the Organization of the Petroleum Exporting Countries (OPEC) deal to curb output.

The cartel was scheduled to meet with non-OPEC countries in Vienna on Saturday to hammer out the final details of the non-members who already pledged to cut their own output by 600,000 barrels per day.

U.S. crude futures gained 0.50% to $51.94 by 11:15AM ET (15:15GMT), while Brent oil traded up 0.95% to $54.98.

 

Source: Investing.com

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