While you were sleeping: Stocks, bonds advance

Tuesday 22nd December 2015

Both Wall Street and US Treasuries moved higher amid optimism that the US economy will grow at a pace that will aid corporate profits while keeping the pace of further Federal Reserve interest rate increases in check.

In 12.56pm trading in New York, the Dow Jones Industrial Average rose 0.3 percent, while the Nasdaq Composite Index gained 0.6 percent. In 12.41pm trading, the Standard & Poor’s 500 Index added 0.2 percent.

“We’ve seen a lot of stimulus over the last year and the market is hoping to see that pay off, provide a spark to the economy,” Joseph Betlej, vice president of Advantus Capital Management, told Bloomberg. “We’re at a point in the business cycle where macro events tend to get magnified, either positively or negatively. Look for a market with continued volatility.”

US Treasuries also advanced, pushing yields on the benchmark 10-year note yield two basis points lower to 2.18 percent, amid expectations a subdued global economy will also keep a lid on US interest rate increases. Last week, the Fed lifted its target rate for the first time since 2006.

“The overall data flow from various parts of the world, including the US, hasn’t been extremely good,” Elwin de Groot, a senior market economist at Rabobank International in Utrecht, Netherlands, told Bloomberg. “If the economy doesn’t pick up in the next few months, Treasury yields, and bond yields more globally, could fall further.”

The Dow moved higher as gains in shares of JPMorgan Chase and those of Visa, last up 1 percent and 0.p percent respectively, outweighed declines in shares of Walt Disney and those of Johnson & Johnson, last trading 1 percent and 0.7 percent weaker respectively.

"It's going to be interesting to see if this market can hold up and divorce itself, at least for today, from the price of oil," Peter Cardillo, chief market economist at First Standard Financial in New York, told Reuters. "We're probably going to stay in the trading range, with an upward bias."

Oil slid to the lowest level in eleven years. US crude futures dropped as low as US$33.98 a barrel, while Brent futures touched a low of US$36.04 a barrel.

"The fundamentals are pretty bearish," Phil Flynn, an analyst at Price Futures Group in Chicago, told Reuters. "Warm temperatures are killing the markets right now and the oversupply is weighing on prices."

In Europe, the Stoxx 600 Index ended the day with a 1.1 percent slide from the previous close. The UK’s FTSE 100 Index fell 0.3 percent, Germany’s DAX Index slid 1 percent, while France’s CAC 40 Index dropped 1.3 percent.

Spain’s IBEX 35 Index sank 3.6 percent after an inconclusive general election over the weekend in which the nation’s ruling Popular Party lost its parliamentary majority. Banks stocks including Banco Santander and Banco Bilbao Vizcaya Argentaria led the slide. Talks to form a coalition government are expected to take weeks.

BusinessDesk.co.nz

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