U.S. Stocks Climb as Fed Hints at June Interest-Rate Increase

Gains in real estate and utilities shares pushed U.S. stocks higher Wednesday as minutes from the Federal Reserve signaled interest rates could rise in June.

The Dow Jones Industrial Average rose 75 points, or 0.4%, to 21012. The S&P 500 gained 0.3% and the Nasdaq Composite added 0.4%.

Real-estate and utilities stocks in the S&P 500 rose 0.6% and 0.7%, respectively. Those sectors are often considered bondlike, because they typically pay relatively high dividends and investors tend to buy them when they are nervous about other parts of the market.

Shares of basic materials producers in the S&P 500 rose 0.7%. Dow component DuPont gained 1.3%.

U.S. stocks have climbed in recent sessions as corporate earnings growth helped outweigh concerns over the ability of the Trump administration to push through its policy agenda, including tax cuts.

Many investors are now focusing on central bank policy ahead of pivotal meetings next month for the Federal Reserve and the European Central Bank. Wednesday's minutes from the Fed's meeting earlier this month showed officials expected that it would "soon be appropriate" to raise short-term rates again, a signal the central bank could act in June.

The Fed's stimulus policies have helped buoy stocks and bond markets in recent years. But many investors view rate increases as a vote of confidence in the U.S. economy that shouldn't derail financial markets, particularly if the Fed continues to move at a gradual pace. Higher interest rates also tend to boost the profitability of certain companies such as banks.

"You've got a lot of things stuck in a range because the forces are pretty balanced," said Russ Koesterich, co-portfolio manager of BlackRock's Global Allocation Fund. "The economy's doing OK, but not taking off. The Fed's hiking, but doing it gently. And investors are nervous about high valuations and low volatility, but there are few other places to go."

The WSJ Dollar Index, which measures the buck against a basket of 16 other currencies, slipped 0.1%. The yield on the benchmark 10-year U.S. Treasury note fell to 2.266%, according to Tradeweb, from 2.285% Tuesday. Yields fall as prices rise. Treasury yields and the dollar are sensitive to Federal Reserve policy, with both tending to gain when expectations of rate increases grow.

The Stoxx Europe 600 rose less than 0.1%, with gains in travel and leisure shares largely offsetting declines in the auto sector. Shares of Daimler declined 1.6% after German authorities turned up the heat in an investigation into alleged diesel-emissions fraud.

In Asia, Chinese stocks pared initial losses to end higher after Moody's Investors Service lowered the country's credit rating for the first time since 1989. The Shanghai Composite Index notched a gain of less than 0.1%.

"I don't think [the downgrade] came as a surprise to people invested in China," said Hao Hong, head of research at BoCom International in Hong Kong.

Most other markets in the region ended higher. A recent rebound in the dollar against the yen helped send Japan's Nikkei Stock Average up 0.7%, while Australian stocks rose 0.2%.

In commodities, U.S. crude oil prices slipped 0.2% to $51.36 a barrel ahead of Thursday's closely watched meeting of the Organization of the Petroleum Exporting Countries, where major producers are expected to extend ongoing production cuts.

Aaron Kuriloff contributed to this article.

Write to Christopher Whittall at christopher.whittall@wsj.com and Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

May 24, 2017 16:24 ET (20:24 GMT)