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Dow closes in the green for 2016; transports surge 3%

17 March 2016 22:28 (UTC +04:00)

Baku-APA. The Dow Jones industrial average closed in positive territory for 2016 on Thursday, as gains in materials and industrials led stocks higher. A rise in oil prices and a positive view of the Fed's Wednesday announcements also helped stocks, APA reports quoting CNBC.

"The market expectations and the Fed are finally aligned," said JJ Kinahan, chief strategist at TD Ameritrade.

"We've hit the reset button. We're back to where we can reset. Everybody's agreed from Fed policymakers to those who are trading the interest rate products," he said, noting focus has shifted to earnings season and "there's a lot of hope" given FedEx's better-than-expected quarterly report.

U.S. crude oil futures settled up 4.5 percent at $40.20 a barrel.

Traders also attributed some of Thursday's gains to activity ahead of Friday's options expiration.

Materials, energy and industrials traded more than 2 percent higher each to lead the S&P 500 higher. The Dow transports traded more than 2.5 percent higher as FedEx surged.

The Dow Jones industrial average briefly added more than 200 points in afternoon trade to swing into positive territory for 2016. Boeing and Goldman Sachs contributed the most to gains. The S&P 500 also briefly erased losses for 2016 in afternoon trade.

At the intraday low of this quarter on Jan. 20, the Dow was down 11.33 percent or nearly 2,000 points (1,974 points to be exact) for the year.

"I think it's probably the recognition the Fed is responding to the weaker environment and they're not going to tighten as quickly," said Jack Ablin, chief investment officer at BMO Private Bank.

Still, he remained cautious on the recent rally given historically high valuations in the S&P 500. The recovery year-to-date "is just a reminder of how expensive the market is," he said. "When the market falls during earnings season it just shows fundamentals just can't support prices."

"Basically this is an FOMC outcome that was more dovish than some had anticipated in the near term," said Stephen Freedman, senior investment strategist at UBS Wealth Management Americas. He expects stocks to remain range-bound over the next few months.

"I think it's marginally supportive. If the Fed had been oblivious to everything the market has been concerned about, that would have been concerning because it shows they are out of touch with reality," he said.

The major averages opened lower and held mixed in midday trade before extending gains.

The Nasdaq composite underperformed as Apple struggled for gains and the iShares Nasdaq Biotechnology ETF (IBB) held more than 1 percent lower.

"It's a bit cautious here because we took out a key level yesterday in the S&P and a resistance level, 2,025," said Peter Coleman, head trader at Convergex.

"You're at pretty lofty levels here."

On Wednesday, U.S. stocks rose after the Fed kept rates unchanged and lowered its projection to two hikes in 2016, from four. The Dow Jones industrial average and S&P 500 both topped their 200-day moving averages to close at their highest of the year so far, with the Dow at 17,325 and the S&P at 2,027.