Shares in the U.S. closed higher on Wednesday, continuing a streak of equity gains that have seen major indices in the country sprint to new record highs. The recent positive U.S. labor data, efforts by central banks to relax monetary policies and formation of a new administration in the U.K. appear to be lifting investor sentiment.
How the major indices performed
The Dow Jones Industrial Average (INDEXDJX:.DJI) added 24.45 points to close at 18372.12 on Wednesday, thus sitting 0.1% above its previous closing mark. The S&P 500 (INDEXSP:.INX) gained 0.29 points to 2152.43 and closed the day 0.1% above Tuesday’s closing level. Dow Futures are up tripled digits this morning.
The S&P 500 was a little rattled by energy stocks with the sector falling 0.7% in yesterday’s session. Energy stocks have been shocked by reports that U.S. crude oil and refined products inventories were rising, thus sparking fears of another round of oil price slump because of a supply glut.
The tech-dominated NASDAQ Composite (INDEXNASDAQ:.IXIC) bucked the trend in the U.S. equity market as it fell 0.3% after shedding 17.09 points to close at 5005.73.
What’s driving investor sentiment?
The U.S. added 287,000 nonfarm jobs in June, significantly higher than 11,000 jobs added in the prior month and far above the projection of economists for the month. The improvement in job creation hinted at an improving economy and appeared to provide an incentive for an interest rate hike by the Federal Reserve, but that could easily change. The Fed has been slow to raise interest rates this year amid mixed economic data and keeps changing its mind.
Investors are also betting that efforts by central banks to ease monetary policies around the world would help mitigate the impact of Brexit on the global economy, though it is unclear how much more easing can be done. The Bank of England, the European Central Bank, the Bank of Japan and the People’s Bank of China are some of the monetary regulators that have promised easing measures that include interest rate cuts and even more accelerated bond purchases notwithstanding negative interest rates in major economies including Germany.
Uncertainty over Britain’s economic future also appeared to have subsided and lifted investor sentiment after Queen Elizabeth II asked Teresa May to form a new government following Former Prime Minister David Cameron’s resignation after losing the Brexit vote. Cameron decided to step down following Britain’s stunning decision to vote in favor of exiting the European Union.
