ARG Airgas, Inc.

By Ellie Ismailidou and Anora Mahmudova, MarketWatch

Renewed terror fears rattled European markets

U.S. stocks climbed to session highs after the minutes from the Federal Reserve October policy meeting confirmed that a majority of policy makers were open to a rate hike in December.

"Most participants" anticipated that the conditions for beginning to raise interest rates "could well be met by the time of the next meeting," the minutes said.

The main indexes extended earlier gains, rising about 1%. The Dow Jones Industrial Average rose 185 points, or 1.1%, to 17,675, while the S&P 500 index was up 25 points, or 1.2%, at 2,075. The Nasdaq Composite Index rose 70 points, or 1.4%, to 5,056.

However, some analysts were skeptical about the Fed's view of U.S. economic growth.

"Economic environment was better 12 months ago than it is today, so data have little to do with the Fed's desire to raise rates. We think that they will raise rates to keep what's left of their credibility," said Channing Smith, managing director at Capital Advisors.

"As long as the market remembers it's more about the trajectory of future rate hikes and not so much about the first rate hike, we should expect to see momentum continue into year-end," said Ryan Larson, head of equity trading at RBC Global Asset Management.

Even before the minutes, Fed officials were telegraphing their intentions. Four regional Fed presidents made hawkish comments Wednesday morning, reassuring investors that they believe the U.S. economy is on solid footing and that they intend to raise interest rates soon.

Three of them--New York Fed President William Dudley, Cleveland Fed President Loretta Mester and Atlanta Fed President Dennis Lockhart--appeared at a panel at the Clearing House annual conference in New York and openly backed an interest-rate hike soon, (http://www.marketwatch.com/story/three-fed-officials-back-an-interest-rate-hike-soon-2015-11-18) (http://www.marketwatch.com/story/three-fed-officials-back-an-interest-rate-hike-soon-2015-11-18)while Richmond Fed President Jeffrey Lacker was interviewed on CNBC.

(http://www.marketwatch.com/story/three-fed-officials-back-an-interest-rate-hike-soon-2015-11-18)But Rob Kaplan, the new president of the Dallas Fed, took a middle-of-the-road stance (http://www.marketwatch.com/story/dallas-feds-kaplan-sees-costs-for-waiting-too-long-to-hike-rates-2015-11-18) backing the Fed's decisions to hold rates steady so far this year, in light of the economic outlook.

Meanwhile, construction on new homes declined by 11% in October, the Commerce Department said Wednesday, to the lowest level since the early spring (http://www.marketwatch.com/story/housing-starts-fall-11-in-october-but-permits-rebound-2015-11-18). But permits for single-family homes, which account for about three-quarters of the housing market, rose to their highest level since the end of 2007.

Stocks also got a boost from the potential merger between Canadian Pacific and U.S. railroad Norfolk Southern (http://www.marketwatch.com/story/norfolk-southern-reveals-low-premium-bid-from-canadian-pacific-2015-11-17), the latest possible deal after France's Air Liquide said on Tuesday it would purchase Airgas, Inc. (ARG).

These potential mergers, along with the big brewery deals announced last week, could have broader significance for the market, analysts said.

"It seems that growth prospects in mature industries have slowed to the point that many companies are finding the only growth avenue left is to gobble up their competitors," said Colin Cieszynski, chief market strategist at CMC Markets, in a note.

But the fact that many of the buyers in recent mega transactions are strategic, namely other companies in the industry, rather than financial, such as hedge funds and private-equity firms, means that "many management teams are still seeing value out there," Cieszynski added.

European stocks (http://www.marketwatch.com/story/uropean-stocks-fall-as-manhunt-for-terrorists-grips-paris-2015-11-18) (http://www.marketwatch.com/story/uropean-stocks-fall-as-manhunt-for-terrorists-grips-paris-2015-11-18)fell, with travel shares under pressure after the raid in a northern Paris suburb (http://www.marketwatch.com/story/at-least-2-dead-as-police-raid-paris-suburb-in-hunt-for-suspected-mastermind-2015-11-18) left two dead and injured several police.

Stocks to watch: Shares of Norfolk Southern Corp.(NSC) surged 6% after the proposed merger.

Citrix Systems, Inc.(CTXS) shares fell 9.5% after the company announced it will spin off its GoTo products into a separate, publicly traded company.

Apple, Inc. (AAPL) shares rose 2.5% after Goldman Sachs added the iPhone maker to its "conviction buy list" Wednesday morning.

Staples Inc. (SPLS) slid 4.3% as quarterly sales missed Wall Street's target, (http://www.marketwatch.com/story/staples-quarterly-sales-miss-wall-streets-mark-2015-11-18) while Target Corp. (TGT) shares fell 5% following third-quarter results that missed estimates.

After the close, Keurig Green Mountain Inc. (GMCR) and Salesforce.com (CRM) are among those expected to report.

Other markets: Alongside weakness for European stocks, most Asian markets didn't have an upbeat day, with the Shanghai Composite Index dropping 1% and the Nikkei 225 index finishing flat.

The dollar (http://www.marketwatch.com/story/us-dollar-mostly-keeps-its-strength-with-fed-minutes-in-focus-2015-11-18) strengthened against major rivals after this morning's barrage of hawkish comments by Fed policy makers. Oil prices (http://www.marketwatch.com/story/oil-prices-rise-but-analysts-say-fundamentals-stay-bearish-2015-11-18) trimmed earlier gains after weekly data showed a smaller-than-expected rise in U.S. crude inventories but an unexpected rise in gasoline stocks.

Gold ended little changed on Wednesday to trade near six-year lows.

--Barbara Kollmeyer contributed to this article.

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(END) Dow Jones Newswires

November 18, 2015 15:02 ET (20:02 GMT)

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