Wall Street rallies, dollar, U.S. Treasury yields jump on Fed rate hike bets
Wall Street indexes rallied on Wednesday, with the Dow hitting a record above 21,000 points, while the dollar and U.S. Treasury yields jumped as investors bet that a U.S. interest rate hike would come soon.
New York Fed President William Dudley – one of the most influential U.S. central bankers, and usually considered a dove – said late Tuesday that the case for tightening monetary policy had become “a lot more compelling”, while San Francisco Fed President John Williams said he saw “no need to delay” raising rates.
The comments overshadowed U.S. President Donald Trump’s Tuesday night speech to Congress and sent U.S. financial stocks soaring, helping the Dow Jones Industrial Average top 21,000 for the first time as banks’ profits get a boost from higher interest rates.
“Williams and Dudley are very strongly signaling that fact that March is a live meeting, and that’s occurring against the backdrop of consistently strong (economic) numbers,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corporation in New York.
At 10:29 a.m. ET, the Dow was up 254.45 points, or 1.22 percent, to 21,066.69, the S&P 500 had gained 25.3 points, or 1.07 percent, to 2,388.94 and the Nasdaq Composite had added 57.20 points, or 0.98 percent, to 5,882.64.
Gains in mining and bank stocks also took Britain’s blue-chip FTSE 100 index to an all-time high. It last traded up 1.5 percent, in line with a rise in the FTSEurofirst 300 index.
U.S. Treasury yields rose broadly with 2-year yields hitting their highest in more than seven years on increased expectations for a Fed rate hike in March.
Having priced in only around a 35-percent chance that the Fed would move this month before the Fed comments, investors are now pricing in around a 66.4-percent probability of a March hike, according to CME Group’s FedWatch tool.
Yields on the 2-year Treasury note rose to a high of 1.308 percent, the highest point since August 2009. Benchmark 10-year notes fell 25/32 in price to yield 2.45 percent. It earlier rose to 2.471, the highest since Feb. 16.
