The rally follows news that the US trade deficit reduced significantly in November, narrowing down to $34.3 billion, the smallest US trade deficit in five years, from October’s trade gap of $39.3 billion, which was revised to a smaller deficit than the $40.6 billion that was reported last month.
The dollar was also boosted by this report and the dollar index, a measure of the dollar’s strength against a basket of six major currencies, climbed 0.2%. The improving trade balance is just the latest in a series of robust US indicators, the strength of which suggest the economy is healthy enough to bear up once the Fed eventually removes its monetary stimulus.
Despite today’s gains in the stock market, the S&P 500 still remains in the red for January so far. The tone of trading is likely to be heavily influenced by news flows in the next few days, though, with minutes from the last Fed meeting scheduled for release tomorrow, the US earnings season beginning on Thursday and government employment data for December out on Friday.