Overnight U.S. Stock News

Overnight U.S. Stock News

• September S&Ps this morning are trading down -9.40 points. The US stock market yesterday erased overnight losses and moved higher on short covering and bargain hunting and then surged in afternoon trade after the Fed promised more stimulus measures if the economy continues to falter: Dow Jones +3.98%, S&P 500 +4.74%, Nasdaq Composite +5.29%. The S&P 500 posted an 11-month low, the Dow fell to a 10-1/2 month low and the Nasdaq dropped to a 10-month low but all the indexes erased their losses and finished higher. Bullish factors included (1) bargain hunting by stock investors after the price-earnings ratio of stocks in the S&P 500 fell to 11.3 times estimated income, the lowest in over 2-years, (2) the post-FOMC statement in which the Fed said it will hold the funds rate "exceptionally low" through at least mid-2013 and it was prepared to use additional policy tools "as appropriate," (3) strength in commodity and energy producers after crude oil rose and gold prices surged to another record high, and (4) the continued decline in interest rates as the 10-year T-note yield fell to an all-time low of 2.034%.
• Bearish factors included (1) the -0.3% decline in Q2 nonfarm productivity along with the downward revision to Q1 nonfarm productivity to -0.6% from the originally reported +1.8%, which shows the first back-to-back decrease in productivity since Q3 and Q4 of 2008 and may keep employers from hiring additional workers or increasing wages, (2) the post-FOMC statement that said "downside risks" to the economic outlook have increased as labor market indicators have "deteriorated" and US household spending has "flattened out," (3) the larger-than-expected +6.5% gain in Jul China consumer prices, the most in 3 years which may limit stimulus measures the Chinese government can use to prop up its economy, and (4) comments from ECB Council member Nowotny who said there is "fear" that the global economy could enter a downturn again and that the current situation had "parallels" to the period after Lehman Brothers collapsed with banks parking funds at central banks.