Fundamentals

U.S. Equities and Commodities Rise On Further World Stimulus

U.S. Session Key Developments

•    Commodities Rise as Dollar Shows Further Weakness
•    G-20 Nations Agree to Maintain World Stimulus Efforts

US equities surged towards year-highs today after the Group of 20 nations agreed to maintain world economic stimulus measures.  UK Chancellor of the Exchequer Alistair Darling held a meeting of G-20 finance ministers where a decision was made to keep interest rates low and maintain budget deficits until the economic recovery takes hold.  Commodities also moved higher on the news as the dollar weakened against its major currency crosses.  Crude oil increased 2.42 percent to $79.30 and spot gold was nearly a full percent higher, closing over $1103.  The Dollar Index tumbled to a fifteen-month intraday low as investors sold the greenback for higher-yielding currencies and assets.  The dollar weakness of the past few months has helped equity shares of American companies that take in more revenue from abroad outperform companies more dependent on domestic demand.  The 50 companies in the S&P 500 with the highest proportion of overseas sales have increased 76 percent since the S&P hit its lowpoint in March.  Investors were bullish on all industries today as nine stocks gained for each that fell on the New York Stock Exchange.

DJIA 30                      10,226.94                   +203.52               +2.03%
The Dow closed its session at a 13-month high as all but one of its thirty stocks finished higher on the day.  The index was lead by strong performances from American Express, Bank of America, and Caterpillar, which each added over 4 percent.  General Electric posted a 3.4 percent gain after reported progress in the proposed sale of a majority stake in NBC Universal to Comcast.  Kraft Foods was the only decliner in the index, falling 0.9 percent after Cadbury rejected its $16.3 billion hostile bid.  Overall, it remains unclear whether the continued rally is built on a solid foundation or whether sidelined liquidity is merely stepping in as the domestic currency weakens.

S&P 500                      1,093.08                       +23.78                 +2.22%
The S&P was the strongest index today, as all of its sectors traded higher.  The Basic Materials sector was over 3.6 percent higher as investors sold currencies to bid up the price of commodities.  Freeport-McMoRan Copper & Gold Inc. increased 4.6 percent as investors continued to show concern over the strength of the U.S. dollar.  The Financials sector increased 3.6 percent during the session after the Federal Reserve announced that nine of ten bank holding companies have significantly raised their reserves since May to withstand potential shocks to the economy.  The G-20 meeting also furthered investor expectations that low rates will continue in months again, helping the financial sector to post large profits going forward.

NASDAQ                         2,154.06                    +41.62                 +1.97%
The tech-heavy NASDAQ ended the session significantly higher as its technology sector closed the day 2.3 percent higher.  Research In Motion and Dell gained over 4 percent each during trading, while Adobe added over 5 percent.  Google gained nearly 2 percent after an agreement to pay $750 million in stock for AdMob Inc., a mobile-phone advertising startup.

Written by James Russell, CFD Trading Research