Stock market rally extends into 2020, China announces stimulus
02-Jan-20 16:25 ET
Dow +330.36 at 28868.71, Nasdaq +119.58 at 9092.21, S&P +27.07 at 3257.85
briefing.com
[BRIEFING.COM] The large-cap indices climbed to new highs on this first trading day of 2020, as fresh stimulus out of China helped ignite a global equity rally. The Nasdaq Composite rose 1.3%, and the S&P 500 (+0.8%) and Dow Jones Industrial Average (+1.2%) followed suit. The Russell 2000 (-0.1%) finished lower.
China started the new year by announcing it will cut the reserve requirement ratio for small and large banks by 50 basis points on Jan. 6, providing about $115 billion in additional liquidity that can be lent out. China's Shanghai Composite rose 1.2%, and Europe Stoxx 600 rose 0.9% amid a view that the stimulus action could have global ripple effects.
In the U.S, the S&P 500 industrials sector (+1.8%) drew support from General Electric (GE 11.93, +0.77, +6.9%), and the Philadelphia Semiconductor Index (+2.1%) pushed to new highs amid strength in AMD (AMD 49.10, +3.24, +7.1%), which had its price target raised $58 from $40 at Nomura.
The mega-cap stocks in the S&P 500 information technology (+1.7%), communication services (+1.3%), and consumer discretionary (+1.3%) sectors continued to outperform, too. Apple (AAPL 300.35, +6.70, +2.3%), Amazon (AMZN 1898.01, +50.17, +2.7%), Alphabet (GOOG 1367.37, +30.35, +2.3%), and Facebook (FB 209.78, +4.53, +2.2%) each climbed more than 2.0%.
Today was undoubtedly risk-on, but the weakness in the S&P 500 utilities (-1.4%), real estate (-1.3%), materials (-1.2%), and consumer staples (-0.8%) sectors, and the underperformance in the small-cap and even the mid-cap stocks, somewhat limited this sentiment to the market's most widely-held names.
The advance in longer-dated U.S. Treasuries, which caused some curve-flattening activity, was another conflicting occurrence. The 2-yr yield was unchanged at 1.57%, and the 10-yr yield declined four basis points to 1.88%. The U.S. Dollar Index rose 0.4% to 96.81. WTI crude increased 0.1% (+0.05) to $61.15/bbl.
Two possible explanations for the interest in Treasuries included 1) the relatively soft manufacturing data out of China and Europe and 2) a view that the stock market was overbought and due for a pullback, thus leading to some defensive positioning in Treasuries. The latter view was not fully supported by the 9.5% drop in the CBOE Volatility Index (12.47, -1.31).
Thursday's economic data was limited to the weekly Initial and Continuing Claims report:
- Initial claims for the week ending December 28 decreased by 2,000 to 222,000 (Briefing.com consensus 225,000) while continuing claims for the week ending December 21 increased by 5,000 to 1.728 million.
- These headline results were not that intriguing, yet the key takeaway from the report -- and what is intriguing -- is that the four-week moving average for initial claims, which are a leading indicator, increased by 4,750 to 233,250. That is the highest four-week moving average since January 27, 2018.
Looking ahead, investors will receive the ISM Manufacturing Index for December, the FOMC Minutes from the Dec. 10-11 meeting, the Construction Spending report for November, and auto and truck sales throughout the day on Friday.
- Nasdaq Composite +1.3% YTD
- Dow Jones Industrial Average +1.2% YTD
- S&P 500 +0.8% YTD
- Russell 2000 -0.1% YTD
Market Snapshot
| Dow | 28868.71 | +330.36 | (1.16%) | | Nasdaq | 9092.21 | +119.58 | (1.33%) | | SP 500 | 3257.85 | +27.07 | (0.84%) | | 10-yr Note | +4/32 | 1.874 |
|
| | NYSE | Adv 1745 | Dec 1101 | Vol 863.2 mln | | Nasdaq | Adv 1881 | Dec 1313 | Vol 2.2 bln |
Industry Watch
| Strong: Industrials, Information Technology, Communication Services |
| | Weak: Utilities, Real Estate, Materials, Consumer Staples |
Moving the Market
-- Stock market extends rally into 2020, small-caps underperformed
-- China announced a 50-bps cut to the reserve requirement ratio for small and large banks
-- Longer-dated U.S. Treasuries gained, causing some curve-flattening trade despite bullish sentiment in stocks
|
WTI crude settles little changed
02-Jan-20 15:25 ET
Dow +239.12 at 28777.47, Nasdaq +96.06 at 9068.69, S&P +18.12 at 3248.90
[BRIEFING.COM] The S&P 500 continues to trade near session highs with a 0.6% gain. Small-caps continue to underperform, with the Russell 2000 down 0.5%. Volume has been heavy than usual at the Nasdaq today.
One last look at the S&P 500 sectors shows the information technology (+1.4%), industrials (+1.1%), and communication services (+1.1%) sectors up more than 1.0%. On the other end, the real estate (-1.4%), utilities (-1.4%), and materials (-1.3%) sectors are down more than 1.0%.
WTI crude ticked up $0.05 (+0.1%) to $61.15/bbl. |
