Intraday Market Update
US equities erased yesterday's losses with a gap higher at the open and are posting sharp gains after the Bank of Japan surprised the markets by cutting interest rates to zero and announcing expansionary monetary policy measures. Japan's central bank said they will guide the overnight call rate at a range of 0.0% to 0.1% until "price stability is in sight," and that it will purchase up to 5 trillion Yen ($60 billion) of various assets, and will also accept another 30 trillion Yen of those assets as collateral under a loan facility. A strong reading in the ISM Non-manufacturing Index has helped equities hang on to early gains as stocks approach last week's highs, which have not been seen since May 13th. The US Dollar is losing ground which has given commodities a boost. Gold printed another all-time high near $1,340 per ounce, while crude oil is approaching highs not seen since the flash crash. Overseas, the Nikkei Index surged +1.47% while the remainder off the region was mostly higher. European markets closed sharply higher.
The ISM non-manufacturing index showed strength in September rising +1.7 points to 53.2, which beat estimates calling for a reading of 52.0. New orders had been slowing but picked up +2.5 points to 54.9. Backlog orders fell slightly to 48 which is the weakest reading since February, while business activity also contracted -1.5 points to 52.8 for its slowest reading since January. However, the rise in new orders hints that backlogs will rise in future months and employment rose +2 points to 50.2. Inventories fell and export orders were strong. Slowing delivery times were very strong at 55.0 which is the highest reading in more than two years. This report shows plenty of activity in the non-manufacturing sector and is helping stocks add to early gains.
In equities, Mosaic (MOS) is up +3% after their strong earning report yesterday. The company said that demand is strengthening and sentiment has improved due to higher agricultural prices and the need to re-stock a global distribution pipeline. Talbots is down nearly -11% after the company lowered its revenue guidance. Chevron (CVX) has gained +1.6% after announcing they would begin purchasing common stock in Q4 under an ongoing share repurchase program. The company said they are targeting buybacks of $500 million to $1 billion per quarter.
JP Morgan released an upbeat report on the large-cap banking sector ahead of Q3 earnings season. Analysts noted that they expect large cap banks to beat estimates due to better net interest income and higher mortgage production revenue. Banking analyst Meredith Whitney told CNBC this morning that the banks could have one more good quarter based on decent credit quality and one time gains.
Core Sector List:
Overall reading: 0 sectors advancing, 20 sectors declining
Strongest Sectors: Gold Miners, Banks, Transportation
Weakest Sectors: None
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