Strong rebound in the financial sector led markets to end mostly in the green on Wednesday. Fed chairwoman Janet Yellen's indication about raising the key interest rate multiple times over the next two years primarily boosted financial stocks. Though the Dow ended in the red for the fourth consecutive session to hit its lowest level this year, the S&P 500 and Nasdaq managed to finish in positive territory.
For a look at the issues currently facing the markets, make sure to read today's Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) declined 0.1%, to close at 19,804.72. However, the S&P 500 also increased 0.2% to close at 2,271.89. The tech-laden Nasdaq Composite Index closed at 5,555.65, gained 0.3%. The fear-gauge CBOE Volatility Index (VIX) increased 5.1% to settle at 12.48. A total of around 6.2 billion shares were traded on Wednesday, higher than the last 20-session average of 6.1 billion shares. Advancers outpaced declining stocks on the NYSE. For 52% stocks that advanced, 44% declined.
Rebound in Financials
Financial sector registered healthy gains on Wednesday following heightened chances of an increase in the pace of rate hikes. In a speech at the Commonwealth Club in San Francisco, Yellen signaled that the Fed may hike the key interest rate "a few times" over the next two years. She said that Fed officials are "expecting to increase our federal funds rate target a few times a year until, by the end of 2019, it is close to our estimate of its longer-run neutral rate of 3 percent."
Yellen's comment helped Financial Select Sector SPDR (XLF) to post a gain of 0.8% and emerge as the best performer among the broader S&P 500 sectors. Key holdings from the sector including Bank of America Corporation ( BAC ), Morgan Stanley ( MS ) and Wells Fargo & Company ( WFC ) gained 2.6%, 1.7% and 0.9%, respectively. While Morgan Stanley holds a Zacks Rank #1 (Strong Buy), Bank of America and Wells Fargo posses a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Moreover, encouraging economic data also boosted the sector along with the broader markets. The Bureau of Labor Statistics reported that CPI and core-CPI gained 0.3% and 0.2%, respectively, last month, both in line with consensus estimates. Additionally, CPI increased 2.1% in 2016, witnessing the highest rate of increase since 2011.
Separately, industrial production increased by 0.8% in December, higher than the consensus estimate of a 0.7% increase. This was the highest increase in percentage terms since 2014. Also, capacity utilization increased from 74.9% in November to 75.5%. Moreover, the Fed's Beige Book highlighted that economic activity at modest paces in most of the regions. It also indicated that prices increased at modest paces in eight out of twelve Districts.
Decrease in shares of UnitedHealth Group Incorporated ( UNH ) and The Goldman Sachs Group, Inc. ( GS ) was the primary reason behind the Dow's decline yesterday. Shares of UnitedHealth dropped 1.8% despite reporting robust fourth quarter earnings results a day earlier. Meanwhile, Goldman Sachs' shares declined 0.6% despite announcing better-than-expected fourth quarter earnings results. ( Read More )
Stocks That Made Headlines
Target Stock Down on Soft Holiday Sales, View Cut
Departmental store retailer, Target Corporation ( TGT ) released soft sales results for the period Nov-Dec 2016, which mainly comprises the holiday season. ( Read More )
Canadian Pacific Down on Q4 Earnings & Revenue Miss
Railroad operator, Canadian Pacific Railway Limited ( CP ) reported lower-than-expected earnings and revenues in the fourth quarter of 2016. ( Read More )
Netflix Reports Solid Q4 Earnings, Subscriber Growth
Shares of video streaming giant, Netflix, Inc. ( NFLX ) jumped nearly 8% in the after-hours session following its better-than-expected fourth-quarter 2016 earnings. ( Read More )
Rent-A-Center Issues Q4 Preliminary Results; Stock Down
Shares of the leading rent-to-own operator in the U.S., Rent-A-Center, Inc. ( RCII ) tanked nearly 12% during after-market trading hours yesterday, after the company issued dismal preliminary guidance for fourth-quarter 2016. ( Read More )
Alphabet Buys Twitter's Platform for Developers
Alphabet Inc. ( GOOGL ) owned Google has decided to acquire Twitter Inc's ( TWTR ) mobile app developer platform Fabric. Google however did not say how much it will pay for Fabric. ( Read More )
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corp. (BAC): Free Stock Analysis Report Morgan Stanley (MS): Free Stock Analysis Report Wells Fargo & Co. (WFC): Free Stock Analysis Report UnitedHealth Group Inc. (UNH): Free Stock Analysis Report Goldman Sachs Group Inc. (GS): Free Stock Analysis Report Target Corp. (TGT): Free Stock Analysis Report Canadian Pacific Railway Ltd. (CP): Free Stock Analysis Report Netflix Inc. (NFLX): Free Stock Analysis Report Rent-A-Center Inc. (RCII): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Twitter Inc. (TWTR): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research