Central Bank Move Launches Stock Futures Higher
FOX Business: The Power to Prosper
Stock-index futures soared after the Federal Reserve and other global central banks revealed measures to boost liquidity in the financial system in light of strains caused by Europe's debt crisis.
As of 9:00 a.m. ET, Dow Jones Industrial Average futures soared 284 points to 11,847, S&P 500 futures jumped 36 points to 1,233 and Nasdaq 100 futures leaped 63 points to 2,275.
The blue chips have added 324 points over the past two days, and are poised to climb even higher on Wednesday.
While news from Europe has ruled the day in many prior sessions, central bank actions are shaking up world markets. The Federal Reserve, European Central Bank and four other central banks unveiled a coordinated action to provide liquidity to "ease strains in financial markets."
The Federal Reserve, European Central Bank and four other central banks unveiled a coordinated action to provide liquidity to financial markets in light of strains caused by Europe's debt crisis.
"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the Fed said in a statement.
Essentially, the Fed reducing the cost of providing dollar funding to the other banks in exchange for their respective currencies to "improve liquidity conditions in global money markets," according to the Fed's website. The swaps are temporary, generally ranging from overnight to three months, and there is a binding agreement to reverse the transaction at a later point, according to the website.
The other banks involved were The Bank of Canada, the Bank of England, the Bank of Japan, and the Swiss National Bank. The move comes on the heels of the Chinese central bank's cutting of the required reserve ratio on the largest lenders to ease credit conditions there. The world's second biggest economy grew at an annualized pace of 9.1% in the third quarter of this year -- the slowest rate since the second quarter of 2009, raising worries that it may be slowing down.
Also on the banking front, Standard & Poor's cut its credit rating on many of America and Europe's largest banks in a move it had signaled earlier in the year. Among the companies affected were investment-banking giant Goldman Sachs (NYSE:GS) and the country's two largest banks by assets JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC). British banks including Barclays (NYSE:BCS) and HSBC (NYSE:HBC) also received downgrades.
Wall Street is also set to receive several key economic reports leading up the highly-awaited monthly employment report from the Labor Department.
The number of planned layoffs fell 0.7% to 42,474 in November from the month prior, according to outplacement firm Challenger, Gray & Christmas. The number of planned job cuts were down 13% from last year, and were driven by the public sector.
A report by payroll firm ADP showed the private sector added 206,000 jobs in November, blowing past forecasts of a 130,000 increase. The September number was also revised higher to 116,000 from 91,000. The labor market has been slowly recovering since the unemployment rate hit 10.1% in October 2009. Small businesses have shown particularly robust job growth, the data have shown in recent months.
The Institute for Supply Management's gauge of manufacturing in the mid-west is expected to show a higher rate of expansion in November than in the month prior. Pending home sales are anticipated to have edged higher by 1.5% in October from September. Like the labor market, the housing sector was hit hard during the recession and has been very slow to recover.
The euro spiked on the news, recently jumping 1.5% to $1.351. Energy markets were in the green as well. The benchmark crude oil contract traded in New York climbed $1.83, or 1.8%, to $101.52 a barrel. Wholesale RBOB gasoline gained 4 cents, or 1.6%, to $2.58 a gallon.
In metals, gold leaped $31.00, or 1.8%, to $1,749 a troy ounce. U.S. Treasury yields pointed higher. The benchmark 10-year note yields 2.089% from 1.984%.
European blue chips soared 3.9%, the English FTSE 100 leaped 3% to 5,495 and the German DAX gained 4.4% to 6,055.
In Asia, the Japanese Nikkei 225 fell 0.51% to 8,435 and the Chinese Hang Seng dipped 1.5% to 17,989.