Though geopolitical tensions continue to tighten, with Israel ramping up its bombardment of Gaza and EU leaders deciding to implement wider sanctions against Russia, it is instead signs of improvement on the domestic front that has held sway on Wall Street today.
By Peter Martin
Tuesday, July 29, 2014
This has helped stocks to advance and lifting the Dow Jones Industrial Average back above the 17,000 mark.
Though investor sentiment remains vulnerable to geopolitical headlines, as evidenced by a short-lived pullback in response to the news of the latest sanctions on Russia, the combined weight of a number of better-than-expected earnings reports and data showing a rise in consumer confidence this month has nudged the major stock index benchmarks into positive territory.
By mid-afternoon in New York, the DJIA was up 0.19% or 31 points at 17,014 and the NASDAQ 100 gained 0.23% to 3976.2, trailed by the S&P 500, which was up by just 0.07% or 1.3 points at 1980.2.
Dow components Merck ($MRK) and Pfizer ($PFE) were among the companies to announce quarterly results, both reporting larger profits than had been forecast by Wall Street analysts. Merck rose 1.96%, though Pfizer gave up earlier gains to fall back into the red slightly. Fellow Dow component $AXP reports after the close of the market today.
Perhaps the biggest shot in the arm for the stock market today was the news that the Conference Board’s index of consumer confidence, one of the most widely-followed measures of consumer attitudes, surged to its highest level in more than six and a half years in July. The latest reading of the index was 90.9, a much stronger result than had been anticipated, while June’s level was upwardly revised from 85.2 to 86.4. The expectations component was extremely strong, advancing 6.3 points to 92.7, its highest level since January 2011, and the present situation component came in at 88.3, representing a solid gain of 2.0 points.
The sub-components relating to labor expectations show consumers have become, on balance, very optimistic about the outlook for jobs. This is likely to work in favor of consumer spending, which would be a big boost for the economy. With the Fed beginning its latest Federal Open Markets Committee (FOMC) meeting today, such a bullish Consumer Confidence report may have arrived at a key moment. We have already seen plenty of evidence that the labor market has enjoyed a sustained period of improvement, manufacturing has shown signs of accelerating and now the consumer sector appears poised to play a leading part in economic growth.
This is a significant amount of ammunition in the hands of hawks at the Fed and, indeed, the US dollar has been boosted in today’s trading. EUR/USD slid 0.23% to 1.3408, USD/CAD jumped 0.52% to 1.0855, while the dollar strengthened 0.26% against the Japanese yen. The Fed announces the outcome of the FOMC meeting tomorrow afternoon.
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