Opening Bell: Stocks Climb On Dovish Fed; Yields Tumble; USD Consolidates
Investing.com | Jan 31, 2019 08:01
- Global stocks climb on Fed’s dovish tone, Apple (NASDAQ:AAPL) earnings relief
- Dollar, Treasury yields tumble post-Fed statements
- U.S. stocks reach downtrend line since 2018 peak h2 Key Events/h2
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Canadian GDP, for November is released Thursday.
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Canadian IPPI and RMPI for December are released Thursday.
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Bank of Canada Governor Carolyn Wilkins speaks on Thursday.
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RBC Manufacturing PMI for January is released on Friday.
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Meetings between Chinese President Xi Jinping’s top economic aide, Vice Premier Liu He, and U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin continue on Thursday.
- Chinese financial markets will close next week for the Lunar New Year holiday.
- Amazon (NASDAQ:AMZN) (NASDAQ:solid growth figures and forecasting $5.64 EPS and revenues of $71.87 billions.
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Canada’s S&P/TSX Composite closed up 0.14 percent Wednesday.
- The STOXX Europe 600 climbed 0.4 percent, to the highest level in almost two months.
- Futures on the S&P 500 advanced 0.2 percent to the highest level in eight weeks.
- The U.K.’s FTSE 100 increased 0.6 percent to the highest level in almost two months.
- Germany’s DAX gained 1 percent to the highest in almost two months.
- The MSCI Emerging Market Index jumped 1 percent to the highest level in more than four months.
- The MSCI Asia Pacific Index advanced 1.2 percent to the highest level in 16 weeks.
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The Canadian USD/CAD was up 0.06 percent against the U.S. greenback early Thursday, trading at 0.7609.
- The U.S. Dollar Index pared to 0.1 percent a 0.25 percent loss, to its lowest level since January 10.
- The euro climbed 0.2 percent to $1.1503, reaching the strongest level in more than three weeks on its fifth consecutive advance.
- The British pound advanced 0.2 percent to $1.3137.
- The Japanese yen gained 0.3 percent to 108.67 per dollar, the strongest in more than two weeks on the biggest rise in more than three weeks.
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Canada’s 10-year yield was down early Thursday at 1.900, a 0.68-percent decrease.
- The yield on 10-year Treasuries fell one basis point to 2.67 percent, the lowest in almost four weeks.
- Germany’s 10-year yield fell two basis points to 0.17 percent, the lowest in four weeks on the biggest fall in a week.
- Britain’s 10-year yield slipped two basis points to 1.234 percent, the lowest in four weeks.
- Italy’s 10-year yield dropped three basis points to 2.571 percent, the lowest in more than six months.
- West Texas Intermediate crude climbed 0.4 percent to $54.47 a barrel, the highest in 10 weeks.
- Gold advanced 0.1 percent to $1,321.42 an ounce, the highest in almost nine months.
European stocks and futures on the Fed prompted investors to increase risk.
Energy firms helped the earnings .
Meanwhile, Facebook (NASDAQ:FB)'s (NASDAQ:FB ) upbeat earnings and record profits drove NASDAQ futures higher. Fourth quarter revenue of $16.91 billion marked a year-over-year growth rate of 30.4 percent for the social media giant, while other key metrics confirmed an upward trend: daily active users reversed the earlier downtrend to grow in every geographic area, after the measure had dropped in Europe and plateaued in the U.S.. Average revenue per user, or ARPU, at $7.37 crushed analyst estimates, marking a 21 percent increase from the previous quarter and a 19 percent annual increase.
Interestingly, the company also confirmed it is has hired three veteran privacy law activists—strengthening signs of a turn-around plan after last year's user data scandal.
Earlier, during the Asian session, regional shares edged higher despite China's AAPL ) tailwinds, as well as on hopes for a U.S.-China trade resolution.
China’s Jerome Powell said the central bank will be “patient” on future interest rate hikes and “flexible” on its path to reducing its balance sheet.
Yields on announcement as the outlook for interest rates shifted: a “patient” Fed suggests a slowdown in hikes, but a “flexible” Fed may even suggest rate cuts, suddenly making current yields more attractive for investors.
The dollar also slipped lower after the FOMC press conference, though it found support above its trend line since October as well as its 200 DMA. Today, the USD was seen wavering around neutral levels after extending losses.
Back to equities, all major U.S. indices hit eight-week highs yesterday, with the the Technology (+3.11 percent) rebounded from the previous day’s dismal performance, turning into Wednesday’s outperformer.
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Technically, the SPX is caught in between conflicting forces. On one hand, it may have completed a bullish pennant. On the other, it is still below the top consolidation formed between October and December. The price closed yesterday's session on the very downtrend line.
The smashed analysts' expectations despite ongoing trade uncertainty. The company exceeded $100 billion in annual revenue for the first time in its history, helped by a record delivery of 806 commercial aircrafts last year—a number it expects to surpass in 2019, forecasting a delivery range of 895 to 905. Moreover, the group bucked the broader weak-guidance trend, forecasting earnings within the range of $19.90 and $20.10 per share this year.
The NASDAQ Composite surged 2.2 percent, outperforming its peers thanks to tech stock gains. The index bounced more than 2.5 percent from an intraday low on Powell's statements. Technically, the tech-heavy gauge is already above its downtrend line, but remains below the 100 and 200 DMAs.
The Russell 2000 underperformed, climbing 0.88 percent. Perhaps U.S.-China trade talks taking place in Washington yesterday and today are increasing the outlook for U.S. exports, favoring multinationals' stocks at the expense of domestic firms shares. The Fed-led dollar weakening is likely to have reinforced that outcome.
Overall, we believe the market reaction to the Fed’s apparent dovish turn is disproportionate. In our view, buzz words like “patient” and “flexible” are insubstantial. Fed Chief Powell reiterated monetary policy decisions remain squarely data-dependent, and pointed out that that the central bank has recently had insufficient data due to the partial government shutdown.
We see comments that the U.S.-China trade dispute has yet to yield any impact on the U.S. economy as the only substantial information to be gathered from yesterday's statements. On a downbeat note, Powell warned that a second government shutdown might cause a loss of confidence.
sharp rise in oil prices in the near future.
In FX news, the pound edged higher even as the European Union and U.K. appeared on a collision path over Brexit.
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