Friends,
Take a Chinese cut in reserve ratio for banks, globally coordinated Central Bank intervention, a nice ADP employment number (206,000 jobs), a better than expected Chicago PMI number (62.6 vs. an expected 58.5), and a Fed Beige Book release indicating positive economic activity and you have the recipe for a very nice rally in risk assets. The Dow Jones Industrial Average was up a whopping 490 points to finish the day a 12,045. The S&P 500 was up 51 points to close at 1246. Gold was up $32 to close near $1751 and oil got through the $100 level to finish the day trading at $100.31 WTI.
On the global front, the Chinese basically began an easing effort, finally admitting that their economy was slowing. At the same time, Central banks including the Fed, the ECB, the Bank of Japan, the Bank of England, the Swiss Central Bank and the SNB Bank of Canada, lowered swap rates (reduced the cost of temporary dollar loans to banks) in an attempt to address worldwide liquidity concerns. This was the main catalyst to the early stock rally. The positive domestic numbers just helped to confirm to the bulls that they had the bears on the run. With the negativity so rampant, the fuel was there for a nice move and we were able to take out some technical resistance levels also. The S&P blasted through the 1205 and 1220 resistance levels and now we can set our sights on 1257 (which is where we started the year) and then ultimately that 1275 area that proved difficult to break in October. The Dow, which was at 11,231 last Friday, is now back above 12,000 in just three days of trading. What a start to the week.
Hopefully today is the verification that we do, indeed, have the beginnings of a nice Santa Claus year-end rally. Of course, we have learned this year that things can change quickly, and these markets turn on any rumor or piece of news. Let’s see how the rest of the week goes.
Have a nice evening everyone.
