All three key U.S. indexes closed at all-time highs on Wednesday, with the S&P 500 moving past 2,700 for the first time. Optimism over strong market performance in 2018 contributed to these gains. Additionally, gains in chipmakers and energy stocks had a positive impact on investor sentiment. Also, favorable economic data, including an upbeat manufacturing report and record construction spending boosted markets.
How the Benchmarks Fared?
The Dow Jones Industrial Average (DJI) increased 0.4%, or 98.53 points to close at 24,922.68. The blue-chip index was just 80 points short of crossing the significant level of 25,000. The S&P 500 rose 0.6% to close at 2,713.06, reaching its best level ever. The tech-laden Nasdaq Composite Index closed at 7,065.53, gaining 0.8%. The tech heavy index registered its best yearly start since 2006.
The fear-gauge CBOE Volatility Index (VIX) decreased 7.9% to close at 9. During the day, the volatility index fell below 9 for the first time ever. A total of around 7.1 billion shares were traded on Wednesday, higher than the last 20-session average of 6.3 billion shares. Advancers outnumbered decliners on the NYSE by a 1.47-to-1 ratio. On Nasdaq, a 1.45-to-1 ratio favored advancing issues.
What Pushed the Benchmarks Upward?
Key indexes started the second trading day of 2018 on an upbeat note as investors remained optimistic that the year will witness more gains for the markets. Further, gains in chipmakers pushed the indexes northward. Intel Corporation's (INTC) shares fell 3.4% after the company admitted that reports indicating that its chips are subjected to data theft due to design flaws are true. However, the chipmaker assured that this problem will be taken care of in the coming weeks.
Following this development, shares of Intel's competitors like NVIDIA Corporation NVDA and Micron Technology, Inc. MU increased 6.6% and 3%, respectively. Key semiconductor index, PHLX Semiconductor (SOX) rose 1.7%.
Additionally, out of the 11 key S&P 500 sectors, nine of them managed to close in the green. Anti-government rallies in major oil exporter Iran and recent crude supply cuts by Russia and OPEC countries, accompanied by steady economic growth had a positive impact on oil prices . Both WTI and Brent crude prices increased to 2% and 1.9% to settle at $61.63 per barrel and $67.84 a barrel, respectively, their best gains since December 2014.
Increase in oil prices had a positive impact on the Energy Select Sector SPDR (XLE), which advanced 1.5%, becoming one of the best performing sectors of the S&P 500. Some of its key components, including Chevron Corporation CVX and Exxon Mobil Corporation XOM rose 0.7% and 2%, respectively. Both the energy giants possess a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Upbeat Economic Data
The ISM manufacturing index rose from 58.2% in November to 59.7% in December and reached its highest settlement in the last two years. This was also higher than the consensus estimate of 58.2%. The manufacturing index, which contributes around 12% to the U.S. economy, has continued to expand on the last month of 2017. The factory activity measure for 2017 average was at 57.6%, highest in 13 years.
The US Census Bureau of the Department of Commerce reported construction spending of $1.257 trillion in November, up 0.8% from downwardly revised October figure. This its highest level on record. Further, the increase in the payout by builders on residential and nonresidential structures was more than the consensus estimate of an increase by 0.6%.
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