“Yesterday was overdone. Clearly we have a major market reversal and today investors are more comfortable with the likelihood of three rate hikes and not four,” said John Lynch, chief investment strategist at LPL Financial in Charlotte, North Carolina.
Despite Fed’s hawkish views, bets on the U.S. short-term interest rate futures continued to reflect expectations of three rate hikes this year, based on a Reuters analysis.
Although analysts expect tightening of monetary policy to unsettle markets in the short term, they remain confident about the health of the U.S. economy and corporate earnings, especially after the new tax law.
“In spite of what we experienced with a return to volatility a couple of weeks ago, we can still see firming economic and profit growth and that is something investors will need to maintain their focus on,” Lynch said.
By 12:33 p.m. ET, the Dow Jones Industrial Average was up 1.12 percent at 25,076.04, powered by gains in United Technologies.
Shares of the industrial conglomerate jumped 3.7 percent after its chief executive said the company was exploring a breakup of its business.
The S&P 500 was up 0.85 percent at 2,724.32 and the Nasdaq Composite gained 0.57 percent to 7,259.08. Gains in these indexes were driven by Apple, Microsoft and Amazon.
U.S. crude <CLc1> rose to a two-week high of $63.03 per barrel, boosted by data showing a surprise draw in U.S. crude inventories and also due to a drop in the dollar. [O/R]
That lifted the S&P energy index by more than 2 percent.
Chesapeake Energy’s shares jumped 23 percent and were on track to post their biggest percentage gain since April 2016 after the company reported upbeat quarterly profit.
Advancing issues outnumbered decliners on the NYSE by 2,167 to 667. On the Nasdaq, 1,782 issues rose and 1,045 fell.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva)