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While you were sleeping: Boeing rallies, Treasuries slide

Thursday 1st February 2018

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Wall Street climbed, bolstered by a rally in Boeing shares following better-than-expected results, while US Treasuries slid amid concern about additional supply and interest rate increases.

Boeing shares led the Dow Jones Industrial Average higher after the plane maker offered an upbeat full-year outlook that exceeded analysts’ forecasts. 

“Actual results could ultimately be higher,” Seth Seifman, an analyst at JPMorgan, said in a note to clients, Reuters reported. “As a result, we expect the stock to outperform despite its recent run now that management has set the table for a solid 2018.”

In 1.18pm trading in New York, the Dow climbed 0.5 percent, while the Nasdaq Composite Index rose 0.3 percent. In 1.03pm trading, the Standard & Poor’s 500 Index added 0.2 percent.

The Dow rose as gains in shares of Boeing and those of Nike, recently up 5.2 percent and 1.7 percent respectively, outweighed declines in shares of Merck and those of Johnson & Johnson, recently down 2.3 percent and 1.8 percent respectively. 

“In general, people are a lot more concerned about a hawkish tone from the [Federal Reserve],” Michael Antonelli, managing director of institutional sales trading at Robert W Baird, told Reuters, before Fed policy makers on Wednesday concluded their last two-day policy meeting chaired by Janet Yellen. 

“While the market has priced in three rate hikes for 2018, if the economy continues to firm up and earnings remain solid, the possibility of a fourth rate hike definitely becomes more firm,” Antonelli noted.

The US Treasury said it will increase the amount of long-term bonds it will sell this quarter. 

Indeed, January has been a rough month for US Treasuries. Ten-year yields have surged about 33 basis points last month, reaching 2.74 percent, the highest level since 2014, according to Bloomberg.

“What we’ve been witnessing is a melt-up of Treasury yields,” Charles Ripley, investment strategist and fixed-income portfolio manager at Allianz Life Insurance, told Bloomberg. “It’s a supply story supported by fundamentals at home and abroad, at a time when the largest buyer is pulling back,” he said, referring to the Fed.

Underpinning signs of a robust labour market, an ADP Research Institute report showed US companies increased payrolls by 234,000 in January, exceeding forecasts by economists.

“The job market juggernaut marches on,” Mark Zandi, chief economist of Moody’s Analytics in West Chester, Pennsylvania, said in a statement. “Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs. If it falls short, it is likely because businesses can’t find workers to fill all the open job positions.”

In Europe, the Stoxx 600 Index finished the day with 0.2 percent decline from the previous close. Germany’s DAX Index slipped 0.1 percent, while the UK’s FTSE 100 index dropped 0.7 percent.

France’s CAC40 Index gained 0.2 percent.


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