Wall Street Extends Rally as Traders Cheer Dovish Fed
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Stocks extended their rally into Thursday, with the Dow posting a 400-point gain, after the Federal Reserve offered a dovish outlook for interest rates.
The Dow Jones Industrial Average (INDEXDJX:DJI) soared 421 points, or 2.4%, to 17778. The S&P 500 (INDEXSP:GSPC) rose 48.3 points, or 2.4%, to 2061. The Nasdaq (NASDAQ:IXIC) was up 104 points, or 2.2%, at 4748.
For roughly two weeks, Wall Street had been under heavy pressure from falling oil prices and headwinds from overseas. West Texas Intermediate crude oil, the U.S. benchmark, dipped below $60 a barrel last week. In Russia, the ruble started the week by hitting record lows against the U.S. dollar.
But news out of the Federal Reserve on Wednesday put global worries to the side. At their last meeting of the year, policy makers determined that the central bank “can be patient” as it prepares a timeline for raising interest rates. The Fed has held rates near zero since December 2008.
The Fed’s statement clarified that its updated guidance is consistent with previous guidance, which said rates would be remain near zero for a “considerable time” after quantitative easing concluded. The central bank ended its bond-buying program in October, and some Fed watchers anticipated a move on interest rates at the December meeting.
The dovish tone was greeted with cheers on Wall Street. The Dow ended Wednesday with its biggest one-day increase since Dec. 18, 2013. On Thursday, the blue-chip index registered its biggest daily gain in three years.
Technology stocks led Thursday’s rally, aided by a 10% gain for Oracle (NASDAQ:ORCL). The software giant reported better-than-expected earnings for its fiscal second quarter. Consumer staples also buoyed the market, with the Consumer Staples Select Sector SPDR (NYSE:XLP) up 1.9%.
Energy names lost momentum by mid-morning trading as West Texas crude turned negative. Oil for January delivery settled $2.36 lower, or 4.2%, at $54.11 a barrel. Futures climbed as high as $58.73 earlier.
Traders continued to exit the traditional safe-haven of government debt. The benchmark 10-year Treasury yield rose to approximately 2.20% from 2.15%. An increase in bond yields corresponds to a decrease in prices.
In corporate news, Dunkin Brands (NASDAQ:DNKN) slipped 6.8% in response to a downgraded forecast for same-store sales in 2015. The Dunkin Donuts and Baskin-Robbins parent cited consumer headwinds and declining sales of packaged coffee.
Rite Aid (NYSE:RAD) surged 11.9% after a beat-and-raise. The pharmacy chain now expects to post full-year earnings that would top Wall Street’s current estimate.
Kraft Foods (NASDAQ:KRFT) said CEO Tony Vernon will retire this year and hand the position over to Chairman John Cahill. The announcement sent shares 6.2% higher.
In commodities, wholesale New York Harbor gasoline dropped three cents to under $1.54 a gallon. Gold futures rose $4.30 to $1,198 a troy ounce.