CFD: U.S. Equities Close Near 12-Week High as Investors Await Results of FOMC Meeting
U.S. Session Key Developments
• Speculation Arising that Fed May Introduce Another Round of Quantitative Easing
• No data releases for U.S. Leaves Room for Recovery Optimism
U.S. Equities Close Near 12-Week High as Investors Await Results of FOMC Meeting
U.S. equity markets built on last week’s rally on Monday, with each index pushing further into positive territory for 2010. The NASDAQ gained the most, up three-quarters of a percent, while both the DJIA and S&P gained approximately one-half of a percent. The three indices are now at levels not seen for the past 12-weeks, as significant rallies by the Pound, Euro, and commodity currencies have exhibited renewed investor confidence in financial markets. Although some economists believe that the recovery is slowing, as evidenced by slowing factory orders, and an expected increase in U.S. Wholesale Inventories, sentiment is gathering that as long manufacturing and service indicators continue to show signs of expansion, growth will be sustained, and earnings will be boosted in the remaining months of 2010. The DJIA is now up 2.60 percent on the year, while the S&P and NASDAQ are up 1.14 percent and 1.61 percent, respectively.
Going forward, tomorrow could prove volatile as a flurry of U.S. economic data will be released during the Tuesday session. Nonfarm Productivity data for the second quarter is expected to show an increase, up 0.2 percent, though down from the 2.8 percent reading previously. IBD/TIPP Economic Optimism, a measure of small business confidence, is expected shortly after the session open. The Federal Open Market Committee Rate Decision, though expected to hold the key interest rate at 0.00-0.25 percent, will likely provide the greatest amount of event risk in the session. Although no change in rate is anticipated, investors are interested in the FOMC’s rhetoric going forward; it is expected that the Federal Reserve may expand stimulus for some time. Finally, in what is typically held lightly due to its release after the market close, the ABC Consumer Confidence reading for the period of August 8 will be announced at 17:00 EST. Currently, Confidence sits at -50.
DJIA 30 10,698.75 +45.19 +0.42%
The Dow Jones Industrial Average gained 45.19 points, or 0.42 percent, during intraday trading to close at 10698.75. After opening nearly 40 points higher, the index entirely retraced its early move within the first 30 minutes of the session before advancing steadily to close just below 10700. The DJIA 30 was led by Cisco Systems, whose share price added 2.78 percent to close at 24.76. Hewlett-Packard was the worst performing company listed as part of the Dow; HP’s shares lost an astounding 8.01 percent following the announcement that Chief Executive Mark Hurd would be leaving the company in the aftermath of recent sexual harassment allegations. The company’s share price is testing its 52-week low of 41.94, ending the session trading at 42.59.
S&P 500 1,127.78 +6.14 +0.55%
The broad-based S&P 500 finished up 6.14 points, or 0.55 percent, to close at 1127.78 after Monday’s trading session. The S&P now sits at its highest level since May amid speculation the FOMC might introduce new quantitative easing measures to stimulate growth at its meeting tomorrow. All ten of the index’s sectors posted gains today, with the telecommunications and consumer services sectors outperforming the rest. Sprint Nextel led the way, gaining 2.92 percent intraday to close at 4.58. Shares of Sprint have gained over 25 percent year-to-date, making it one of the top performing companies listed on the S&P 500.
NASDAQ 2,305.69 +17.22 +0.75%
The NASDAQ outperformed its American counterparts on Monday, adding 17.22 points, or 0.75 percent, to close at 2305.69. The tech-based index has been unable to hold on to its gains beyond the significant 2300 level in recent weeks, but a breakout may be on the horizon (see below). Shares of Research in Motion (RIMM) surged following an announcement the company would cave to Saudi Demands regarding its privacy policy. The company saw its share price gain 3.50 percent intraday to close at 55.32.
Written by Jay B. Steinberg and Christopher Vecchio, CFD Trading Analysts
For Questions/Comments, please contact him at JSteinberg@fxcm.com
