Wall Street Gains On Geopolitical Stability
Stocks on Wall Street staged some solid gains on Monday, consolidating Friday’s impressive performance, to put the S&P 500 index on track for its largest two-day rise since February.
Monday, August 11, 2014 - 00:00
The advance in stock prices comes amid signs of stabilization in the geopolitical conflicts that have been nibbling at investor confidence, following weekend news of a new ceasefire agreement in Gaza and US airstrikes against Islamic State insurgents in Iraq. Russian President Vladimir Putin said that Russia is working with the International Committee of the Red Cross to send humanitarian aid to Ukraine.
Though these various situations could all flare up again, signs of simultaneous steadying of the three separate conflicts has worked to encourage buying in the stock market today, not least in the tech-heavy area of the NASDAQ. By early afternoon in New York, the NASDAQ 100 was up 25.5 points or 0.66% at 3913.5, after climbing as high as 3921.2 earlier in the session. The other leading benchmarks achieved slightly less impressive gains, but still made respectable progress: the Dow Jones Industrial Average rose 0.31% or 50 points to 16,604, while the wider-encompassing S&P 500 index advanced 0.45% to 1940.3.
Though the majority of blue-chips have now reported quarterly earnings, there are still a number of big names set to announce this week, including Dow components Cisco ($CSCO) on Wednesday and Wal-Mart ($WMT) on Thursday. Retail bellwether Wal-Mart’s earnings accompany a glut of reports from its sector, with Macy’s, Nordstrom and JC Penney among the big names from which we will hear in the next few days, potentially providing some crucial insight into recent consumer behaviour. On this front, we can also look forward to July retail sales data, which are scheduled to be released pre-market on Wednesday. After strong gains in May, retail sales disappointed in June with a gain of just 0.2%. The same rise of 0.2% is expected for July.
The easing of tensions in the global conflicts has dampened demand for safe-haven assets, helping the US dollar to rise 0.11% against the Japanese yen to a rate of 102.15, while currencies normally correlated with growth and risk-appetite, such as the Canadian dollar, have tended to fare better today. The Canadian dollar also received a boost from data showing Canadian housing starts rose to their fastest pace last month since last October, contributing to a 0.37% slide in USD/CAD.
Construction starts on Canadian residential buildings came in at an annualized rate of 200,098 in July, up 0.7% from June’s 198,665 and comfortably above the consensus estimate of 193,000, with gains led by Atlantic Canada and Ontario. Poor weather had blighted housing starts in Canada for the first quarter of the year, but the last four months have pointed to an upward trend, kept buoyant by low mortgage rates. This latest result should provide a boost to GDP, but if mortgage rates rise going into next year as predicted, the Canadian housing market will be facing some serious headwind.
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