U.S. stocks rose on Thursday, led by gains in bank shares, a day after the Federal Reserve raised interest rates for the second time in nearly a decade.
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The Fed sees three rate hikes next year instead of the two foreseen in September, partly as a result of the fiscal stimulus expected to hit under President-elect Donald Trump.
Trump's spending plans could trigger inflation and bring about higher interest rates, making banks a likely winning sector in the new administration.
Art Hogan, chief market strategist at Wunderlich Securities in New York, said the advance in bank shares also reflects a rotation into a sector which had been stagnant during most of the multi-year rally that has seen major indexes hit record highs.
He added that if Trump's deregulation plans come through, lenders will benefit as they are "one of the most regulated sectors. The one Trump sector you can be sure of is financials," Hogan said.
The S&P 500 has risen just under 6 percent since the Nov. 8 election, but its banks component has risen almost 25 percent since.
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The Dow Jones industrial average rose 59.71 points, or 0.3 percent, to 19,852.24, the S&P 500 gained 8.75 points, or 0.39 percent, to 2,262.03 and the Nasdaq Composite added 20.18 points, or 0.37 percent, to 5,456.86.
The Dow came within 50 points of hitting 20,000 for the first time.
The strength of the rally in stocks has triggered concern that the market is technically vulnerable, or overbought, while the recent rally in the U.S. dollar, while indicative of a strong economy, has also raised alarms over the negative effect on earnings of companies with overseas exposure.
"The thought is that earnings will be better and the economy is strong enough to be able to withstand higher interest rates, and that is why we're not seeing a decline in stocks," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
"That being said, the stronger dollar and higher interest rates will at some point filter through to earnings. It's just a matter of when and how."
Economic data on Thursday showed U.S. consumer prices moderated in November, but the underlying trend continued to point to firming inflation pressures.
Yahoo fell 6.1 percent to $38.41 after the technology company disclosed a massive data breach that raised fears Verizon might kill a deal to buy its core internet business. Verizon was up 0.3 percent at $51.81.
About 8.18 billion shares changed hands in U.S. exchanges, above the 7.4 billion daily average over the last 20 sessions.
Advancing issues outnumbered declining ones on the NYSE by a 1.30-to-1 ratio; on Nasdaq, a 1.50-to-1 ratio favored advancers.
The S&P 500 posted 37 new 52-week highs and no new lows; the Nasdaq Composite recorded 161 new highs and 59 new lows.