NEW YORK (Reuters) – The S&P 500 edged up and the Nasdaq reached another record closing high on Thursday after the European Central Bank said it would avoid raising interest rates until mid-2019, and data showed U.S. economic strength.
The strong U.S. retail sales numbers came a day after the U.S. Federal Reserve increased its key interest rate and hinted at the possibility of two more hikes by the end of 2018.
The ECB announced it would end its bond-purchase program at year-end but signaled that any interest rate hike was still distant.
“People are looking at potential tightening on the part of the ECB and realizing it may not come to fruition,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco. “I think people saw that today and thought that was positive news.”
The Fed’s rate hike on Wednesday was accompanied by an upbeat economic assessment. This was followed by Thursday’s better-than-expected retail sales data and unemployment rolls falling to a near 44-1/2 year low, underscoring the central bank’s optimism.
“(The Fed’s) ability to raise rates more, three or four times, that’s actually good news,” said Doug Cote, chief market strategist at Voya Investment Management in New York. “The reason they’re able to do it is the economy’s so strong.”
The stronger-than-expected retail sales data “smashed expectations,” Cote said. “So that’s good news on top of good news and that’s really what’s driving markets today.”
The Dow Jones Industrial Average fell 25.89 points, or 0.1 percent, to 25,175.31, the S&P 500 gained 6.86 points, or 0.25 percent, to 2,782.49 and the Nasdaq Composite added 65.34 points, or 0.85 percent, to 7,761.04.
Of the 11 major sectors of the S&P 500, seven ended the session in positive territory and one was unchanged on the day.
The rate-sensitive financial sector was the biggest percentage loser of the S&P 500, led by a 1.8 percent decline in JP Morgan Chase shares, as U.S. Treasury yields fell on news that the ECB would be holding rates steady for longer than many investors expected.
JP Morgan Chase was also the biggest drag on the Dow.
Utilities, consumer discretionary and telecommunications showed the biggest sector gains.
Microsoft Corp shares advanced 0.6 percent on news that it was working on technology to automate retail purchases in a challenge to Amazon.com.
Twenty-First Century Fox was up 2.1 percent after Comcast offered $65 billion in an effort to out-bid Walt Disney Co’s merger offer by 20 percent.
Shares of Royal Caribbean Cruises jumped 5.1 percent after the company bought a 66.7 percent stake in privately-held Silversea Cruises for about $1 billion.
Advancing issues outnumbered declining ones on the NYSE by a 1.33-to-1 ratio; on Nasdaq, a 1.35-to-1 ratio favored advancers.
The S&P 500 posted 35 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 168 new highs and 32 new lows.
Volume on U.S. exchanges was 6.75 billion shares, compared to the 6.70 billion average for the full session over the last 20 trading days.
Reporting by Stephen Culp; Editing by Chizu Nomiyama