ARG Airgas, Inc.

By Ellie Ismailidou and Anora Mahmudova, MarketWatch

Renewed terror fears rattled European markets

U.S. stocks rose sharply on Wednesday after the minutes from the Federal Reserve's October policy meeting confirmed that a majority of policy makers were open to an interest-rate hike in December.

The main indexes booked most of their solid advances in the final two hours of trading.

The S&P 500 closed 33.14 points, or 1.6%, higher at 2,083.58, its biggest gain in four weeks. The S&P 500 has registered gains in two of the past three sessions. All 10 main sectors on the S&P 500 closed higher, led by health-care, up 2%. Financials, which should benefit from higher rates in the future, gained 1.8%.

The Dow Jones Industrial Average rallied 247.66 points, or 1.4%, to finish at 17,737.16., extending a three-day ascent for the blue-chips gauge, which has seen a nearly 500- point, or 2.9%, gain since Nov. 16., according to FactSet data.

Meanwhile, the Nasdaq Composite ended the day up 89.19 points, or 1.8%, at 5,075.20, logging its largest point and percentage gain since Oct. 23, FactSet data show.

"Most participants" in the Fed's meeting on monetary policy anticipated that the conditions for beginning to raise interest rates "could well be met by the time of the next meeting," the minutes said (http://www.marketwatch.com/story/fed-minutes-show-majority-willing-to-raise-interest-rates-in-december-2015-11-18).

At first glance, the fact that stock markets rallied and Treasury yields were flat (http://www.marketwatch.com/story/treasury-yields-edge-up-on-track-to-snap-a-5-day-slump-2015-11-18)after the release of hawkish Fed minutes could look like a contradiction. Ultraloose Fed monetary policy has been associated with fueling a multiyear bull market in stocks.

But analysts said investors may be reading the Fed minutes as signaling that the U.S. economy is improving. "The fact that the Fed feels confident in the market's stability, makes investors more comfortable buying stocks and other risky assets," said Robert Tipp, Prudential Fixed Income's chief investment strategist.

Other market participants said that the economy is due for a rate hike.

"Markets are rising after news that a rate hike in December is coming and they should. The rates should be higher in the current economy. When the cost of money is finally lifted, good investments will be made," said James M. Meyer, chief investment officer at Tower Bridge Advisors.

A harrowing manhunt in Paris (http://www.marketwatch.com/story/paris-apartment-siege-ends-with-seven-arrests-two-deaths-2015-11-18), which resulted in the capture of some of the suspects believed to be linked to the terrorist attacks in the European city on Friday, also may have heartened investors, some market participants said.

"The rebound in the stock market has probably more to do with developments in Europe, such as the capture and arrest of a terrorist cell in France. There is probably some short-covering," said Robert Pavlik, Chief Market Strategist at Boston Private Wealth

Some analysts, however, 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.

Even before the minutes, Fed officials were telegraphing their intentions. Several 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)

In economic news, 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.

On the corporate front, stocks 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).

Stocks to watch: Shares of Norfolk Southern Corp.(NSC) surged 6.4% after the proposed merger.

Citrix Systems, Inc.(CTXS) shares fell 10% after the company announced it plans to spin off its GoTo products into a separate, publicly traded company.

Apple, Inc. (AAPL) shares rose 3.2% after Goldman Sachs added the iPhone maker to its "conviction buy list" Wednesday morning.

Staples Inc. (SPLS) slid 2.7% 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 4.3% following third-quarter results that missed estimates.

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.

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)closed lower, with travel shares under pressure after the raid in northern Paris.

The dollar (http://www.marketwatch.com/story/us-dollar-mostly-keeps-its-strength-with-fed-minutes-in-focus-2015-11-18) briefly rose to a new seven-month high against the euro, but pulled back somewhat after the Fed minutes showed that the prospect of a rate hike wasn't as ironclad as forex traders hoped.

Oil prices (http://www.marketwatch.com/story/oil-prices-rise-but-analysts-say-fundamentals-stay-bearish-2015-11-18) eked out a modest gain, recovering from a dip below $40 a barrel for the first time since August, 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 16:58 ET (21:58 GMT)

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