US open: Stocks in the black after strong data; Fed minutes eyed
US stocks rose in early trade on Wednesday, underpinned by solid data on manufacturing and construction spending, as investors eyed the latest minutes from the Federal Reserve.
At 1600 GMT, the Dow Jones Industrial Average was up 0.2% to 24,872.83, the S&P 500 was 0.4% higher at 2,706.16 and the Nasdaq was 0.6% firmer at 7,060.01, pushing further into record territory.
Data released earlier by the Institute for Supply Management showed growth in the US economy’s manufacturing sector unexpectedly improved in December.
The ISM’s headline manufacturing index rose to 59.7 from 58.2 in November, beating expectations for a drop to 58.1.
Timothy R. Fiore, chair of the ISM, said: “This indicates growth in manufacturing for the 16th consecutive month, led by strong expansion in new orders and production with hiring growing at a slower rate and supplier deliveries continuing to struggle.”
A reading above 50 indicates expansion, while a reading below signals contraction.
The new orders index increased to 69.4 in December from 64 the month before, marking the highest reading since January 2004, when the index came in at 70.6. Meanwhile, the employment index ticked down to 57 from 59.7 in November and the production index printed at 65.8 from 63.9 a month earlier.
There was more good news on the data front as figures from the Commerce Department revealed that construction spending rose 0.8% to an all-time high of $1.26trn in November, beating expectations for a 0.5% increase.
Spreadex analyst Connor Campbell said: “The ISM reading joins yesterday’s Markit PMI in suggesting the US manufacturing sector had a very strong end to 2017. This news helped lift a previously flagging dollar, with the greenback taking 0.7% back off the pound and 0.4% off the euro, allowing the currency to ease, if in no way erase, its recent woes.”
Still to come, minutes from the Federal Open Market Committee’s 12-13 December meeting are due at 1900 GMT.
After the Fed hiked rates last month by 0.25% - the third hike of 2017 - market participants will be looking to the minutes for more clues as to what the US central bank is thinking in terms of interest rates for this year.
Rabobank said its Fed watcher Philip Marey continues to argue that core inflation will continue to undershoot the Fed’s 2% target. “Therefore, he expects only two hikes this year - one in June and another in December - instead of the three hikes that are implied by the dot plot.”
In corporate news, Scana surged as it agreed to an all-stock merger with Dominion Energy that values the group at $7.9bn.
Elsewhere, MoneyGram International suffered heavy losses after it and Ant Financial Services said they have ended their merger agreement.