By Saumya Vaishampayan
U.S. stocks remained higher Wednesday after the release of
minutes from the Federal Reserve's latest meeting, with the S&P
500 on track to snap a five-session losing streak.
An upbeat U.S. labor-market report and gains in European stocks
also lifted the market. Investors continued to eye crude-oil
prices, which rose Wednesday but have slumped 54% since June,
raising concerns about slowing global growth.
The Dow Jones Industrial Average advanced 192 points, or 1.1%,
to 17563. The S&P 500 rose 22 points, or 1.1%, to 2025 and the
Nasdaq Composite Index gained 52 points, or 1.1%, to 4645.
The Fed minutes showed that officials saw global economic
turbulence as a significant risk to the U.S. economy when they met
in December. Still, officials looked past those concerns because
they expect foreign central bankers to respond with fresh stimulus
measures. Fed officials have signaled that U.S. interest rates are
likely to rise in 2015. Fed officials also discussed the downward
pressure on inflation and inflation expectations from the slide in
oil prices.
The Fed minutes don't shift the case for investing in stocks,
said Hank Herrmann, chairman and chief executive of Waddell &
Reed, which manages about $135 billion in assets. "There's no such
thing as a perfect environment, but low inflation, low interest
rates and strong economic activity usually result in pretty
positive trends in corporate earnings, " he said. "Stock prices
follow earnings," he added.
Wednesday's gains come after five sessions of losses for the
S&P 500, its longest losing streak since December 2013. The Dow
has declined 2.7% since its Dec. 26 record close of 18053.71, while
the S&P 500 has fallen 3.1% from its Dec. 29 record close of
2090.57.
"We'd come too far too fast," said Steven Rosen, head of single
stock and ETF volatility trading at Société Générale, referring to
recent stock-market declines. Wednesday's rebound is "not that
surprising, especially when you've had this prolonged market of
buying the dips," he added.
Pullbacks in recent months have been short-lived, as many
investors believe that economic improvement and growing corporate
profits should continue to propel stocks higher. Fourth-quarter
earnings season unofficially begins on Jan. 12, when Alcoa Inc.
reports results. Overall, companies in the S&P 500 are expected
to report a 2.3% increase in fourth-quarter earnings, according to
FactSet.
Boosting sentiment Wednesday, a report from Automatic Data
Processing showed that U.S. private payrolls increased 241,000 in
December . Economists surveyed by The Wall Street Journal expected
a gain of 250,000 in the ADP figure.
Improvement in the labor market is a "very strong tailwind for
the market to continue higher in 2015, excluding the global
macroeconomic situation," said Jeffrey Yu, head of single-stock
derivatives trading at UBS AG. He said that much of the recent
selling in U.S. stocks had been sparked by global concerns and the
slide in oil prices.
On Wednesday, crude-oil futures gained 1.9% to $48.83 a barrel,
steadying after their recent slide. The slump in oil prices has
contributed to recent declines in the U.S. stock market, which has
suffered its worst beginning to a year since 2008.
"The drop in prices has been not only noteworthy because of the
magnitude but also because of the speed at which it occurred," said
Eric Wiegand, senior portfolio manager at U.S. Bank Wealth
Management, which has $122 billion under management.
Mr. Wiegand said he was underweight in energy stocks and hasn't
yet been lured back into the sector. "Until we get a better sense
of a stabilizing price in the commodity, we are still a little
apprehensive," he said.
Even as the Fed considers an eventual tightening of monetary
policy, the prospect of additional stimulus in the eurozone and
existing stimulus in Japan mean that global monetary policy will
remain easy. Loose monetary policy has been credited in part with
fueling the nearly six-year bull run in stocks.
Putting pressure on the European Central Bank to boost its own
stimulus was a report on a fall in prices. In the eurozone,
consumer prices fell on an annual basis in December for the first
time in more than five years, down 0.2% from a year ago, according
to the European Union's statistics agency.
The unveiling of additional stimulus from the ECB would result
in a "pretty massive rally in global stocks," said Brian Needleman,
chief investment officer at Cornerstone Financial Partners, a
wealth management firm with $1.05 billion under management. He said
his biggest investment was in European stocks, particularly in the
financial, industrial and technology sectors.
The euro hit a nine-year low against the dollar on Wednesday,
recently trading at $1.1837. European stocks gained. Germany's DAX
gained 0.5% and the Stoxx Europe 600 also rose 0.5%.
Gains in health-care stocks led the S&P 500 higher, with the
sector up 2.1%.
In other markets, gold futures fell 0.5% to $1212.80 an ounce.
The yield on the 10-year Treasury inched down to 1.956% from 1.964%
Tuesday. Yields fall as prices rise.
Among individual stocks, shares of J.C. Penney Co. surged 20%
after the retailer reported stronger-than-expected holiday
sales.
Monsanto Co. reported results for its November quarter that beat
expectations, driven by strength in its soybean segment. The
company gave a disappointing outlook for its February quarter,
expecting earnings to fall 5% to 10%. Shares rose 1.6%.
T-Mobile US Inc. shares rose 3.9% after it reported strong
subscriber growth in the fourth quarter.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
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