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US stocks rally, Dow Jones closes just shy of 20,000

Thursday, 5 Jan 2017 05:37:06 | Rebecca Hyam

Traders celebrate on the floor of the New York Stock Exchange today at the closing bell. US stocks surged more than 11 per cent, with the Dow index registering its biggest point gain ever as investors cheered governments' action plans to combat the global financial crisis. (Timothy A Clary: AFP)

US stocks rallied overnight, with the Dow Jones Industrial Average closing just 58 points shy of the historic 20,000-point level.

Markets at 8:15am (AEDT):

  • ASX SPI 200 futures +0.5pc 5,724
  • AUD: 72.8 US cents, 59.07 British pence, 85.43 Japanese yen, 69.41 eurocents, $NZ1.0451
  • US: S&P 500 +0.57pc to 2,270, Dow Jones +0.3pc to 19,942, Nasdaq +0.88pc to 5,477
  • Europe: Euro Stoxx -0.06pc to 353.68, FTSE +0.17pc to 7,189 DAX steady at 11,584
  • Commodities: Gold +0.46pc to $US1,164.18/ounce, Brent crude oil +1.44pc $US56.27

The minutes from the US Federal Reserve's December meeting were released towards the end of the overnight trading session, but there was little reaction from the markets.

The Fed raised interest rates at last month's meeting, for only the second time in a decade. It also forecast three further interest rate increases in 2017.

The minutes revealed the central bank was concerned about upside risks to interest rates from President-elect Donald Trump's proposed fiscal stimulus measures.

A notable excerpt showed that "in their discussion of their economic forecasts, participants emphasised their considerable uncertainty about the timing, size and composition of any future fiscal and other economic policy initiatives as well as about how those policies might affect aggregate demand and supply".

"Several participants pointed out that, depending on the mix of tax, spending, regulatory, and other possible policy changes, economic growth might turn out to be faster or slower than they currently anticipated.

"However, almost all also indicated that the upside risks to their forecasts for economic growth had increased as a result of prospects for more expansionary fiscal policies in coming years," the minutes stated.

"Many participants judged that the risk of a sizeable undershooting of the longer-run normal unemployment rate had increased somewhat and that the Committee might need to raise the federal funds rate more quickly than currently anticipated to limit the degree of undershooting and stem a potential build-up of inflationary pressures."

With just over two weeks before Mr Trump takes office, investors were eagerly searching for more detail on his proposed policies, including tax cuts and increased government spending on large infrastructure projects.

In corporate news overnight, General Motors, Ford and Fiat Chrysler gained value after reporting positive sales throughout the United States last month.

The annualised selling rate is expected to be about 17.5 million motor vehicles.

European shares came under pressure, with retailers under the spotlight, after the UK fashion chain, Next cut its profit guidance and cautioned on future trade.

Next's warning saw its share price slump 14.4 per cent and put pressure on other high street retailers with UK exposure.

Marks & Spencer tumbled 6.1 per cent and the owner of Primark, Associated British Foods fell by 3 per cent.

Locally, stocks are on track for a positive start, with the ASX SPI 200 up 0.5 per cent to 5,724.

The Australian dollar rallied overnight and at 8:15am AEDT, it was worth 72.8 US cents.

West Texas Crude oil had edged up to $US53.21 a barrel, a barrel of Tapis was worth $US56.56 and spot gold had increased to $US1,164.18 an ounce.

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