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The US stocks rally resumed today, lifting major indices back to records and the euro strengthened following European Central Bank minutes opened the door to a greater tightening of monetary policy. All three major US indices finished solidly higher at records as investors appeared to jump at the chance to buy stocks at lower prices following Wednesday's modest pullback. "The path of least resistance is still up," said Maris Ogg of Towers Bridge Advisors. Today's rally was prompted in part by higher oil prices, which boosted petroleum-linked equities.
Investors are also keen for the upcoming earnings season, which kicks off tomorrow with reports from JPMorgan Chase and Wells Fargo. But analysts also pointed to bullish underlying sentiment as a driver. Big gainers included oil companies such as Chevron and industrial heavyweights Caterpillar and Boeing. Strong earnings from Delta Air Lines lifted it nearly five percent and boosted United Continental, American Airlines and other carriers. Meanwhile, European equities were mixed, but the single currency advanced above USD 1.200 following the ECB minutes from the December 13-14 meeting that said the bank's forward guidance on stimulus "could be revisited early" in 2018, a time-frame that caught traders off guard. "The minutes were music to the ear of euro bulls, bolstering the case for officials to taper stimulus this year, and the notion that the ECB may be on a faster track to an interest rate hike," said Joe Manimbo, senior market analyst at Western Union Business Solutions. But Kathy Lien of BK Asset Management said since the euro's rise since the December ECB meeting could mean the minutes are out of date. "The stronger currency and rising yields is in many ways akin to a rate hike," Lien said. "As market dynamics are very different today than four weeks ago, Mario Draghi's eagerness to change their guidance could be diminished as well.
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