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So much of this year’s stock market rally has been driven by the Fed’s programme of quantitative easing that we are frequently seeing major economic news being viewed by market participants through the prism of how it might affect stimulus.
In such a regard, we have often seen the kind of inverted behaviour where strong economic news can be seen as bad by investors, and vice versa. There was evidence of that again earlier today, when the reflex action of stock index futures was a sell-off in the wake of strong payroll data for October.
What is encouraging about today is that, while the strength of the dollar shows traders do consider the chances of a taper to have increased, the stock market has rallied, suggesting investors are looking outside the sphere of taper/no taper and recognising that an economy that is strong enough to justify a reduction in stimulus is an economy where businesses may thrive and earnings continue to grow. Ultimately, the US economy being strong enough to stand on its own two legs has to been seen as desirable.
Into the final hour of trading on Wall Street, the S&P 500 had risen 0.93% to 1763.4, meaning the benchmark index is on track for a weekly gain. The Dow achieved triple-digit gains, climbing 100 points or 0.65% to 15,694, with JP Morgan, Boeing and Disney leading the way. Disney gained over 1% after beating estimates for both earnings and revenue with its fiscal fourth-quarter report last night.
Looking ahead to next week, Monday is a US public holiday: although the financial markets will be open, there will be a dearth of economic releases.