While you were sleeping: Global equities surge

Friday 19th December 2014

Equities extended Wednesday’s rally on Federal Reserve Chair Janet Yellen’s promise to “be patient” with interest rates, bolstered by data showing the US economy continues to accelerate.

"Based on its current assessment, the committee judges that it can be patient in beginning to normalise the stance of monetary policy," the Federal Open Market Committee said in a statement after a two day meeting that ended on Wednesday. Yellen reiterated that point in her final news conference of the year.

In afternoon trading in New York, the Dow Jones Industrial Average rallied 1.69 percent, the Standard & Poor’s 500 Index jumped 1.71 percent, while the Nasdaq Composite Index advanced 1.73 percent. Technology shares, including Oracle, paced the advance.

A Reuters poll of Wall Street dealers puts expectations for the first interest rate increase in June of 2015. Yellen signalled to reporters that it was unlikely that policy makers would lift rates in the first quarter of the new year.

The latest data underpinned the view the US economy keeps gathering steam. Initial claims for state unemployment benefits unexpectedly fell, down 6,000 to a seasonally adjusted 289,000 for the week ended December 13.

“We’re seeing sustained improvement in the US economy, and it’s now to the point where it’s feeding on itself,” Richard Moody, chief economist at Regions Financial in Birmingham, Alabama, told Bloomberg News. “Consumers are feeling better about the labour market.”

In other good news, shares of Rite Aid soared, last up 13.4 percent, after the company posted quarterly results that exceeded expectations and upgraded its 2015 outlook.

Gains in shares of Microsoft and those of Goldman Sachs, last up 3.1 percent and 2.7 percent respectively, propelled the Dow higher. Shares of IBM gained 2.6 percent. All 30 stocks in the Dow were trading higher from the previous day’s close.

Oracle advanced 8.5 percent after the company reported far better than expected quarterly profit and sales as it taps into the demand for cloud computing services.

In Europe, the Stoxx 600 Index ended the session with a 3 percent jump from the previous close. The UK’s FTSE 100 Index climbed 2 percent, Germany’s DAX Index rose 2.8 percent, while France’s CAC 40 Index added 3.4 percent.

"It appears investors have taken a stance to take advantage of the extended downside move of the market," Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey, told Reuters. "All the money that has come out of oil needs to find a home. Money is systematically being forced into equities, for example, out of energy into technology."

Indeed, oil continued its decline after a short spike higher early in New York trading, a move attributed to short covering.

“What we are facing now and what the world is facing is a temporary situation and will pass,” Saudi Arabia’s oil minister, Ali al-Naimi, told the Saudi press agency.

However, few believe the slide in oil prices has run its course.

"We're continuing to search for a bottom and might even see another significant drop before the year end," Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut, told Reuters.

BusinessDesk.co.nz

Comments from our readers

No comments yet