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Dec 15, 2016

U.S. Stock Market Future Indications by MarketWatch - December 15, 2016: Dow Poised to Aim Again for 20,000 Mark, Even as Fed Signals More Rate Hikes

marketwatch.com
 
Carla Mozee
 
U.S. stocks looked set to resume their march upward Thursday, with the markets seemingly taking in stride the potential for a faster pace of rate increases next year in the face what could be stronger economic growth during a Trump administration.

Futures for the major benchmarks were up modestly, with those for the Dow Jones Industrial Average  YMH7, +0.24%  up by 44 points, or 0.2%, to 19,808.00. S&P 500 Index futures ESH7, +0.21%   picked up 4.25 points, or 0.2%, to 2,256.50, and futures for the Nasdaq-100 NQH7, +0.12%  tacked on 5 points, or 0.1%, 4,935.50.
The major indexes ended a volatile session lower on Wednesday, as investors weighed up the prospect of a faster pace of interest rate increases in 2017 from the Federal Reserve, led by Chairwoman Janet Yellen. The Dow Jones Industrial Average DJIA, -0.60%  dropped 118.5 points, or 0.6%, to 19,792.66. The S&P 500 index SPX, -0.81%  fell 18.44 points, or 0.8%, to 2,253.28. The Nasdaq Composite Index COMP, -0.50%  gave up 27.16 points, or 0.5%, to 5,436.67.
While equities pulled back Wednesday, stocks have surged since the presidential election in November. Gains have been attributed to expectations that President-elect Donald Trump’s policy proposals, such as tax cuts and deregulation, will spur economic growth. As a result, the Dow has been stepping closer to the key psychological level of 20,000, and major indexes have been hitting a series of record closes.
Read: What Dow 20,000 will — and won’t — mean for investors
The central bank lifted its key short-term rate to a range of 0.5% to 0.75%, from the previous 0.25% to 0.5%. It is also now planning three rate hikes in 2017, compared with the two hikes it had previously mapped out.
After the Fed decision, the “market disregarded Yellen’s view that the shift in the so-called “dot plot’ was small, and not all members actually agree that rates need to rise next year. However, Animal Spirits, unleashed by President-elect Trump, have won the day,” said Kathleen Brooks, research director at City Index, in a note Thursday.
“The view seems to be that Trump will deliver on his fiscal stimulus promise, the economy will expand sharply, inflation will rise and the Fed will need to hike rates more than currently forecast, but not by enough to lead to a serious stock market sell-off,” she wrote.
Early Thursday, gold prices GCG7, -2.73%  dropped more than 2% to levels not seen since February. Assets without a fixed yield such as gold, tend to become less attractive as interest rates rise.
In addition, higher interest rates tend to boost the dollar, which in turn puts pressure on commodities priced in the greenback. The U.S. Dollar Index DXY, +0.42%  jumped to a 13-year high on Wednesday after the Fed announcement and continued to gain ground Thursday.
Economic docket: A flurry of data is on its way, led by the consumer price index for November, due at 8:30 a.m. Eastern Time, with a reading of 0.2% expected.
Other reports scheduled for the same time: weekly jobless claims, the Empire state index for December, the Philly Fed index for the same month and the current account deficit for the third quarter.
Markit’s flash, or preliminary, purchasing managers’ index for manufacturing in December comes out at 9:45 a.m. Eastern Time. The forecast is for a reading of 54.1. The home builders’ index for December is due at 10 a.m. Eastern.
Stocks to watch: Yahoo Inc. YHOO, -1.35%  was down 2.6% in low, premarket volume after the company disclosed another security breach that could affect more than 1 billion users.
Mondelez International Inc. MDLZ, -0.58%  was up 5.2% ahead of the bell, adding to a surge late Wednesday following reports that foods giant Kraft Heinz Co. KHC, -0.68%  was considering buying the snack maker whose brands include Oreo and Ritz. Bloomberg late Wednesday reported that Kraft isn’t in talks to purchase Mondelez.
After trading closes Thursday, financial results are due from Oracle Corp. ORCL, +0.29%  and Adobe Systems Inc. ADBE, -0.32%  .
Other markets: European stocks SXXP, +0.37%  were up modestly, with bank shares FX7, +1.65%  drawn higher. In Asia ADOW, -1.99% stocks finished mostly lower, leaving Hong Kong’s Hang Seng Index HSI, -1.77%  down 1.8%.
Oil futures CLF7, +0.53%  were up 0.5% to trade above $51 a barrel.