Fundamentals, US Markets

US Markets Rally With Dow Reaching Fresh 2009 High

U.S. Session Key Developments

•    Commodities Pare Gains into Close
•    Dollar Weakens on Risk Appetite
•    Existing Home Sales Rise at Record Pace

US equities closed higher to start the week following favorable indicators in the US and Europe, along with comments by Dallas Fed President Evans that alluded to a long time horizon before interest rates see an increase, while emphasizing that recession risk is now unlikely. Evans expects no increase until late 2010, echoing investor sentiment in fed funds futures. Should this forecast become reality, the US dollar may continue to see weakness as it recently passed below favorable support. Rallying in response, commodities saw significant upside with gold at a fresh high above $1170 per ounce while crude tested $80 per barrel before paring sharply in the afternoon, perhaps a sign of lingering concern. Also boosting sentiment today was a morning release of existing home sales for October, which came in with record growth north of 10% in October. Ultimately, the Dow reached a fresh 2009 high that could lift sentiment and lead to further gains across equities into the year-end. While there remains some clout as to the sustainability of recovery once government incentives are pulled back, it appears that this is far from becoming a chief concern. Following the strong data today, investors will be look ahead this week at revisions to third quarter GDP, consumer confidence, and other important event releases for the Tuesday session of trading.

DJIA 30                      10,450.95                   +132.79               +1.29%
Trading in the Dow Jones Industrial Average led to a higher close by more than one percent with all sectors higher while only aluminum producer Alcoa and drug maker Merck saw fractional losses. On the other end of the spectrum, telecom rallied the most with AT&T and Verizon both up nearly three percent. Ultimately the index set a new high today, which could bode well for further upside.

S&P 500                    1,106.24                   +14.86                 +1.36%
The broader S&P500 index closed strong with all sectors advancing while more than 88% of stocks gained. Leading the advance was a 2.73% gain in Telecom, while seven sectors posted moves in excess of one percent. 19 of the 20 largest firms posted higher on the session with Exxon Mobile up 1.77% as crude advanced.

NASDAQ                         2,176.01                    +29.97             +1.40%
Trading in the tech-heavy NASDAQ led to the largest move of the five majors, while the index remains the most dominant since the start of the year with a gain of 38%. All sectors advanced with technology accounted for the bulk of the index move. Major contributors included Apple, up nearly three percent, along with a 2.18% rise in iPhone carrier AT&T.

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com