Rising expectations for additional economic stimulus measures by China fuel stocks
U.S. stocks ended sharply higher on Tuesday, 08 September 2015 with the main indexes posting their second-largest daily gains of the year. Stocks rebounded from last week's rout as investment funds repositioned their portfolios in the wake of the Labor Day holiday and market participants were cheered by rising expectations for additional economic stimulus measures by Chinese authorities.
The Dow Jones Industrial Average jumped 390.30 points, or 2.4%, to 16,492.68, with all of its 30 components closing in positive territory, led by General Electric on news that European Union is set to approve its $17 billion acquisition of Alstom power business.
The Nasdaq Composite ended the day up 128.01 points, or 2.7% at 4,811.93, with biotechnology stocks leading the gains. The S&P 500 closed 48.19 points, or 2.5%, higher at 1,969.41, with all 10 main sectors finishing sharply higher.
Health-care and technology sectors led the gains.
Advances by U.S. stocks followed gains in Europe and Asia as weak export data in China, released overnight, fueled bets that Beijing might be inspired to implement further measures to boost the country's sluggish economy.
The buying surge at the start reflected a build-up of strength in the futures market that took root yesterday as U.S. futures labored their way higher alongside European equities. Once the Tuesday session began in Asia, China's Shanghai Composite rallied 2.9% with speculation of continued state support for equities overshadowing mediocre trade data (trade balance $60.24 billion; expected $48.20 billion) that showed a 5.5% year-over- year decline in exports (expected -6.0%) and a 13.8% drop in imports (expected -8.2%; prior -8.1%).
Investors received just one economic report today, which was met with little fanfare. The Consumer Credit report for July showed an increase of $19.10 billion, which was higher than the consensus estimate of $18.00 billion. The prior month's credit growth was revised to $27.00 billion from $20.70 billion.
Among stocks under focus, shares of E-Trade Financial Corp jumped 7.5% after the company announced a restructuring plan to eliminate all of the $4.4 billion of wholesale funding obligations from its bank balance sheet by the end of the quarter. Apple rose 2.8% a day before the tech giant is expected to unveil its iPhone 6S and iPhone 6S Plus models at its 9 September hardware event.
Also on Tuesday, Chinese stock market regulators revealed plans to introduce a circuit breaker mechanism for its stock exchanges, aimed at preventing panic selloffs during heightened volatility.
Bullion prices ended mixed at Comex on Tuesday, 98 September 2015. Gold futures settled Tuesday with a modest decline as investors turned their attention to a rally in the U.S. stock market ahead of the Federal Reserve's monetary-policy meeting next week. The meeting may determine the direction of the dollar and dollar-denominated commodities like gold. Demand from Asian buyers helped keep a cap on any losses for gold with recent data showing that China bought 16 tons of the yellow metal in August, after purchasing 19 tons in July. The U.S. dollar also weakened a bit Tuesday, giving dollar-denominated gold prices some added support.
Gold for December delivery edged down by 40 cents to settle at $1,121 an ounce on Comex, after trading between a low of $1,114.70 and a high of $1,126. In other metals, December silver rose 20.6 cents, or 1.4%, to $14.755 an ounce.
Crude oil prices fell on Tuesday, 08 September 2015 but settled above the session's worst levels, finding some support on the back of a climb in U.S. and Chinese stock markets, as Brent prices recouped all of their losses in the previous session. The petroleum markets recovered from their lows after an afternoon rally drove the Shanghai Composite Index to a 2.92% gain, with traders noting the late surge was consistent with past government stimulus efforts
October crude settled at $45.94 a barrel, down 11 cents, or 0.2%, on the New York Mercantile Exchange, after tapping a low of $44.14. Brent crude for October delivery on London's ICE Futures exchange rose $1.89, or about 4%, to $49.52 a barrel in the wake of a 4% decline on Monday.
The late-afternoon gains in China stirred up market sentiments leading to more gains in the U.S. futures market while European equities enjoyed an opening surge. Better than expected economic data highlighted the European session as eurozone Q2 GDP was unexpectedly revised up to 0.4% quarter-over-quarter from 0.3%.
Today's advance in equities lured some money out of the Treasury market as the 10-yr note retreated into the afternoon, settling near its low with the benchmark yield up seven basis points at 2.19%.
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