U.S. equities inched ever higher on Wednesday, once again taking the Dow Jones Industrial Average to within a shout of the 20,000 threshold that was teased oh-so-often in the closing weeks of 2016.
Focus was on the release of the latest Federal Reserve meeting minutes, revealing an increasingly hawkish Fed in light of likely fiscal stimulus plans from President-elect Donald Trump and noted upside risks to inflation forecasts.
Several policymakers noted that the labor market appeared to be tightening significantly more than expected. This raises the potential that the Fed’s “gradual” rate tightening pace could quicken should wage inflation develop.
In the end, the Dow gained 0.3%, the S&P 500 Index wafted up 0.6%, the Nasdaq Composite gained 0.9% and the Russell 2000 ended the day 2.3% higher. Treasury bonds were stronger, the dollar was weaker, gold gained 0.3% and oil rose 1.8%.
Material stocks led the way higher thanks to a strong performance by steelmakers, rising 1.4% as a group. Consumer discretionary stocks rose 1.3% thanks to notable rises in automakers and homebuilders.
Auto stocks were helped by strong December auto sales, with Autodata pegging the final tally at a 18.4 million seasonally-adjusted annualized rate that beats the prior peak from November 2015 and comes well ahead of the 17.7 million rate expected. General Motors Company (NYSE:GM) gained 5.5% after reporting unadjusted U.S. Sales rose 10% beating the 3.4% gain expected. Ford Motor Company (NYSE:F) gained 4.6% after U.S. sales rose 0.3% vs. the 2% decline expected thanks to a 17.8% jump in Lincoln sales.
Telecom and energy stocks were the laggards, down 0.3%. Crude refiner Valero Energy Corporation (NYSE:VLO) fell 3.6% after being downgraded by analysts at Deutsche Bank on valuation concerns.
While U.S. markets continue their quiet drift higher, there continues to be volatility in Asian markets as China’s currency remains under intense pressure cascading problems into the Chinese interbank lending and bond markets. Weakness in the yuan amid intense capital outflows has boosted Bitcoin nearly to a record high — nearly at parity with gold futures — as Chinese investors seek a safe haven amid tight capital controls.
Overnight, the yuan surged on reports of a possible capital control crackdown helping lift U.S. equity futures into the opening bell. Keep an eye on Asian markets tonight, because if the yuan continues to strengthen it could be the catalyst needed to finally push the Dow over 20,000.