by Pinchas Cohen
Key Events
All three US major indices recorded new record closes yesterday. The S&P 500 registered its third record in a row, an advance of 0.07 percent, exactly the same as the day before.
However, yesterday’s advance was led by growth stocks rather than defensive equities which pulled the index higher on Tuesday. Yesterday, Financials were up 0.54 percent, followed by Technology which gained 0.25 percent. It’s the S&P's 47th record this year.
The Dow Jones Industrial Average posted its biggest gain in five weeks, opening with a rising 0.39 percent gap, skipping past the 23,000 milestone for the first time without looking back, to close at 23,157.60, for a gain of 0.69 percent. The last time the index of the 30 biggest US stocks had such a meaningful upside gap on a record high was June 19, only the gap was smaller, just 0.27 percent, as was the close, up 0.67 percent.
Global Financial Affairs
Stocks, as well as the Dow, were buttressed by IBM’s (NYSE:IBM) earnings call forecast for its first sales growth in five years, boosting the stock's price by 9 percent, its biggest advance since 2009.
While IBM is a component of both the Dow and the S&P 500, its weighting on the Dow is eight times heavier than on the SPX, meaning it had a more significant impact on the Dow's performance yesterday. Abbot Laboratories (NYSE:ABT) and Northern Trust Corp (NASDAQ:NTRS) beat expectations, which helped carry the S&P 500 Index higher.
While the Stoxx Europe 600 closed yesterday with a 0.3 percent gain, on bets the European Central Bank will resume its accommodative policies, today Europe’s leading index declined ahead of Spain's 10:00AM European Central Time deadline (4:00 EDT) for Catalonia to back down from its secessionist stance. The index was also pushed lower by underwhelming sales growth figures from Unilever (NYSE:UL) and SAP (NYSE:SAP).
As the deadline passed, Spain said that it will suspend Catalan autonomy and impose direct rule on the region. Spain's Prime Minister Mariano Rajoy has called an emergency cabinet meeting for this coming Saturday to initiate official measures against the wayward autonomous community.
Already, the economic blow is being felt: Spanish stocks have been underperforming their European counterparts this months and companies have threatened to leave the region. Catalonia is responsible for a fifth of Spain's economy, and the country has already lowered its economic growth forecasts because of the stand-off.
Meanwhile, over 12,000 miles southeast, the New Zealand dollar dropped a hefty 1.3 percent after the country’s Labour Party joined the populist First Party, resuming the trend that has been gripping the world since last year.
Earlier this morning China reported that its economy expanded 6.8 percent last quarter, matching expectations, with retail sales and industrial output accelerating in September. Still, the yuan retreated, even after data from the central bank suggested that capital inflows have returned.
After yesterday’s first daily loss on four days of gains, the dollar pared all of its losses and edged yet higher. However, keep in mind that yesterday’s trading formed a bearish Shooting Star.
The price of crude oil declined for the first time in five days, paring more than three days of gains.
Up Ahead
- U.K. Prime Minister Theresa May is said to be planning to demand that the European Union move Brexit talks on to trade in a face-to-face showdown with leaders over dinner at the Brussels summit on Thursday.
- U.S. economic data Thursday includes initial jobless claims, Philadelphia Fed data and consumer confidence.
Market Moves
Stocks
- The Stoxx Europe 600 Index decreased 0.6 percent as of 9:20 a.m. London time, the lowest in almost three weeks.
- The U.K.’s FTSE 100 fell 0.5 percent to the lowest in more than two weeks.
- Germany’s DAX fell 0.6 percent to the lowest in more than a week.
- Japan's TOPIX Index gained 0.3 percent, its highest point in more than 10 years.
- The MSCI Asia Pacific Index dipped 0.1 percent.
- The MSCI Emerging Markets Index dipped 0.8 percent to the lowest in more than a week.
- S&P 500 Futures decreased 0.5 percent to 2,546.50, the lowest in more than a week.
Currencies
- The Dollar Index increased 0.07 percent, paring yesterday’s first loss in five sessions.
- The euro slipped 0.1 percent to $1.178.
- The British pound fell 0.3 percent to $1.3166, the weakest in more than a week.
- The Japanese yen climbed 0.3 percent to 112.58 per dollar.
Bonds
- The yield on 10-year Treasuries fell three basis points to 2.32 percent. Yields edged higher yesterday, but dropped upon reaching the downward trend line.
- Germany’s 10-year yield declined two basis points to 0.38 percent.
- Britain’s 10-year yield decreased four basis points to 1.279 percent.
- Japan’s 10-year yield dipped one basis point to 0.067 percent.
Commodities