A surge in banks and other financial stocks that stand to benefit from higher interest rates pushed indexes to the edge of record highs Thursday. The dollar rose sharply against other currencies and the price of gold sank on expectations that the Federal Reserve will follow up Wednesday’s rate increase with several more next year.
The Standard & Poor’s 500 index rose 8.75 points, or 0.4 percent, to 2,262.03. It made up about half its loss from the prior day, which was its worst in two months.
The Dow Jones industrial average rose 59.71 points, or 0.3 percent, to 19,852.24. The Nasdaq composite rose 20.18 points, or 0.4 percent, to 5,456.85. All three indexes are within half a percent of their record highs.
“I think the market is just going through a period of rational exuberance,” says Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. “The prospect for faster economic growth and the normalization of interest rates — these aren’t bad things for the stock market.”
The Federal Reserve raised short-term interest rates Wednesday by a quarter of a percentage point on the back of a strengthening economy.
Higher rates can also help banks reap bigger profits from making loans, and financial stocks jumped to the biggest gain of the 11 sectors that make up the S&P 500 index, 1 percent.