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Wall Street continued its bull run on Thursday on the back of positive developments on trade war front and monetary stimulus injected by the European Central Bank. Investors are expecting a second rate cut by the Fed next week. All three major stock indexes closed in the green.
The Dow Jones Industrial Average (DJI) gained 0.2% to close at 27,182.45. The S&P 500 increased 0.3% points to close at 3,009.57. The Nasdaq Composite Index closed at 8,194.47, climbing 0.3%. The fear-gauge CBOE Volatility Index (VIX) decreased 2.7% to close at 14.22. A total of 7.51 billion shares were traded on Thursday, higher than the last 20-session average of 6.79 billion. Advancers outnumbered advancers on the NYSE by a 1.24-to-1 ratio. On Nasdaq, a 1.19-to-1 ratio favored advancing issues.
How Did The Benchmarks Perform?
The Dow closed in positive territory for seventh consecutive day with 22 components of the 30-stock blue-chip index closing in the green while the remaining 8 ended in red. This marked the index’s largest winning streak since May 14, 2018.
The S&P 500 also ended in the green for three straight days. The Materials Select Sector SPDR (XLB) and the Real Estate Select Sector SPDR (XLRE) gained 0.8% and 0.6%, respectively. Notably, nine out of total 11 sectors of the benchmark index closed in the green while two finished in red.
The Nasdaq Composite finished in the green for second successive days due to strong performance of semiconductor stocks. Advanced Micro Devices Inc. AMD, with a Zacks Rank #3 (Hold) gained 1.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ECB Injects Massive Stimulus
On Sep 12, the ECB cut its main deposit rate by 10 basis points to -0.50%. This simply means that commercial banks need to pay the ECB to hold their overnight excess cash balance. This was the first rate cut by the central bank since early 2016 despite the fact that the benchmark is already in negative territory.
However, the central bank left twoother major benchmark rates unchanged. Rate on main refinancing operations and the marginal lending facility remained same at 0% and 0.25%, respectively.
However, the ECB eased the terms of its long-term lending facility through which some banks will avail loans at a cheaper rate. Additionally, introduction of a tiered system by the central bank will enable struggling banks to be exempted to pay to the ECB while holding overnight excess cash balance with it.
Meanwhile, the central bank of the Eurozone reintroduced the quantitative easing program. Effective Nov 1, the ECB will purchase €20 billion of bonds each month from banks in order to improve liquidity in the systems so that Eurozone banks can lend more to their clients. Per the governing council of the ECB, this asset purchase program will continue “for as long as necessary to reinforce the accommodative impact of its policy rates.”