Friday, November 28, 2014
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Market Digest Online

MONDAY, NOVEMBER 24, 2014... U.S. stocks ended the week at highs as markets rallied on overseas central banks' stimulus efforts and an encouraging domestic outlook. Early on Friday, China's central bank made its first interest rate cut in more than two years and the European Central Bank took action to stimulate the economy.

"The reason that Europe and China are doing this is not positive," said JJ Kinahan, chief strategist at TD Ameritrade, although he noted that weakness abroad has likely made high-yielding U.S. equities and bonds more attractive. "The close today will be interesting if people want to get out of their positions (to limit risk next week)."

The Dow Jones Industrial Average closed at a record for the 28th time this year but failed to regain the intraday record it set in the morning of a more than 170-point gain, with most blue chips trading higher. Caterpillar led gains with a rise of more than 4 percent after Stifel initiated coverage with a "buy" rating and a price target of $122. The S&P also lost some of its early gains in its 45th record close for the year, with the materials sector continuing to lead sector advancers, up more than 1 percent. The Nasdaq lost most of its morning gains but recovered slightly in the close.

In an surprise move after the close of the Shanghai exchange for the week, the People's Bank of China cut its benchmark interest rates on Friday for the first time in more than two years to lower borrowing costs and lift a cooling economy back on track. The one-year benchmark lending rate has been trimmed by 40 basis points to 5.6 percent. Major European national stock indices closed sharply higher after European Central Bank President Mario Draghi reiterated dovish statements in a speech at a European banking conference in Frankfurt on Friday. Later in the day, the ECB also announced that it has begun buying asset-backed securities.

Stimulus by central banks overseas would not necessarily translate into Fed action in the United States, analysts said. "We're going towards diverging monetary policy, we're tightening," Hogan said, although he noted the Fed showed some concern that global slowdown would affect the U.S. economy.

Meanwhile, speculation is growing that the Organization of Petroleum Exporting Countries may cut oil production when it meets next Thursday. That talk has helped drive oil futures up from record lows and is likely to keep the market volatile on Friday and next week.

"One of the untold stories here is the OPEC move," Hogan said, noting that stimulus abroad would likely boost demand for energy and commodities. Crude oil futures for January delivery gained settled up 66 cents at $76.51 a barrel on the New York Mercantile Exchange, with gold futures for December settling up $6.80 at $1,197.70.

The Dow Jones Industrial Average closed up 91.06 points, or 0.51 percent, at 17,810.06, with Caterpillar leading gains and Microsoft the greatest of six blue-chip decliners. The S&P 500 closed up 10.75 points, or 0.52 percent, at 2,063.50, with materials leading gains as all sectors rose. The Nasdaq closed up 11.10 points, or 0.24 percent, at 4,712.97. Two stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 994.8 million and a composite volume of 3.8 billion in the close.

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