China Rate Cut, Dovish Draghi Lift Stocks to Fresh Highs
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Stocks closed at fresh highs Friday after China’s central bank cut interest rates, while expectations for more economic stimulus in Europe got another jolt.
Today’s Markets
The Dow Jones Industrial Average gained 91 points, or 0.5%, to 17810. The S&P 500 rose 10.8 points, or 0.5%, to 2063. The Nasdaq added 11.1 points, or 0.2%, to 4712.
The blue-chip index surpassed Thursday’s record close of 17719, setting a new all-time high for the 28th time this year. Friday marked the 45th record close of 2014 for the S&P.
China’s central bank surprised markets by slashing its one-year benchmark lending rate 0.40 percentage points to 5.6%. China last cut interest rates in 2012. The move follows a disappointing growth rate in the latest quarter. The nation’s economy expanded 7.3%, marking a five-year low.
U.S. equity futures had already turned higher after a speech by European Central Bank President Mario Draghi, who reiterated additional stimulus measures are under consideration. He said Eurozone inflation must be lifted to the central bank’s target “without delay.” Previously, Draghi suggested the central bank would increase its asset purchases possibly through government bonds, while many investment banks expect it to begin buying sovereign debt next year. Additionally, ahead of the opening bell on Wall Street, the ECB announced it would begin buying asset-backed securities in an effort to encourage bank lending, and help revive the struggling economy.
In corporate news, Caterpillar (NYSE:CAT) plowed 4.3% higher thanks to a positive report from Stifel Nicolaus, which started coverage of the company with a “buy” rating. Caterpillar accounted for roughly 30 points of the Dow’s gains.
Dow Chemical (NYSE:DOW) jumped 2.6% on news that the company agreed with activist hedge fund Third Point to add four independent board members. GameStop (NYSE:GME) tumbled 13% after reporting weaker-than-expected quarterly earnings and a disappointing forecast for the holiday quarter.
In commodities, West Texas Intermediate crude oil rose 66 cents, or 0.9%, to $76.51 a barrel. Wholesale New York Harbor gasoline advanced three cents, or 1.5%, to approximately $2.05 a gallon.
Gold futures jumped $8.10, or 0.7%, to $1,199 a troy ounce.