Wall Street bounces back after early profit taking

US stocks were pushed into the red earlier, following the moves of global stock markets, but have shown resilience and rebounded for the most part.

By early afternoon in New York, the Dow was almost flat, down just 0.04% or 6 points at 15,744, while the other two major US stock index benchmarks managed to claim positive territory, with the S&P 500 erasing its earlier losses to rise 0.28% and the NASDAQ 100 climbing 0.58% to 3384.6.

Investor sentiment seems to continue to be very much dominated by the outlook for the Fed’s QE programme, but the awkward aspect of that is that the central bank’s committee has been very clear that the decision will hinge on economic data, meaning the market is left dangling waiting for the next report, with little clear direction at times when data is scarce. Unfortunately that describes this week pretty well thus far, where there has been a deficiency of any heavyweight indicators.

The latter half of the week is likely to deliver more in this area, with jobless claims tomorrow and industrial production data on Friday. We will also hear from those at the top of the tree at the Fed, with Ben Bernanke speaking publicly late tonight and Janet Yellen testifying before the Senate tomorrow.

We may see some knee-jerk reactions to Ms Yellen’s comments, but I personally would not expect her to divert too far from the Fed’s existing declarations, namely they have seen improvements but would like to see more, inflation is too low but should pick up, ultimately the decision will be made against incoming data.

The euro has strengthened against the dollar today, gaining 0.14% to 1.3455, despite a report earlier showing a surprisingly large drop in industrial production in the euro region during September.

Factory output declined 0.5% month-on-month, excluding construction, which does not bode well for Q3 GDP (for which we have a flash estimate tomorrow), but the fact that the euro has made up ground on the dollar suggests the market sees last week’s rate cut by the ECB as the end of its action for now, with QE from the central bank judged unlikely.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.