The US markets closed higher on Wednesday, with the Dow industrials staged a late rally to end above 26,000 for the first time ever, knocking out another round-number milestone at a history-setting pace for blue chips, with all the main equity indexes finishing at all-time highs. An upbeat gauge of conditions at the Federal Reserve's business districts contributed to the buying sentiment.
The Federal Reserve said that the US economy and inflation expanded at a modest-to-moderate pace from late November through the end of 2017, while wages continued to push higher. The US central bank said in its periodic Beige Book report on the economy that most districts said that wages increased at a modest pace. A few districts observed that firms were raising wages in a broader range of industries and positions since the previous report. Several regional Fed districts noted increases in manufacturing, construction, and transportation input costs. Some reported expectations of further wage increases in the coming months, though prices pressures were still mixed. Despite still weak inflation overall, Fed policymakers currently expect to raise interest rates three times this year. The central bank raised rates three times in 2017 against a backdrop of steady growth and low unemployment. The majority of Fed policymakers appear to be putting more emphasis on the need to raise rates given the economy is at or near full employment rather than waiting until inflation appreciably rises. US job growth slowed more than expected in December amid a decline in retail employment, but a pick-up in monthly wage gains pointed to labor market strength that could pave the way for the Fed to increase rates in March.
On the economy front, industrial production rose 0.9% in December for the fourth straight monthly increase. The gain was above expectations of a 0.6% increase. For the fourth quarter, production jumped at an 8.2% annual rate, after a 1.3% drop in the prior quarter caused by hurricane damage. For the calendar year, production rose 3.6%, up from a 0.8% gain in 2016 and the fastest pace since 2010. In December, output among manufacturers only rose 0.1%. Most of the gain in production in December came from mining and utilities. Mining output rose a strong 1.6% in December while utility output jumped 5.6%. Production among auto makers rose 2%. Capacity utilization, meanwhile, rose to 77.9% in December, the highest rate since February 2015.
The Dow Jones Industrial Average added 322.79 points or 1.25 percent to 26,115.65, the Nasdaq gained 74.594 points or 1.03 percent to 7,298.28, and the S&P 500 edged higher by 26.14 points or 0.94 percent to 2,802.56.