Most surprising to me about yesterday’s price action in the broader markets is that it happened gradually over the course of the entire morning. The SPX futures market was indicating a market set to open up about 0.7%, and then once the market opened, it was flooded with buy orders, which then intensified later in the morning when the market broke to new highs for the year, and it never looked back. Draghi’s comments seemed as expected to me, and the strong U.S. economic data seemed more in line with setting the stage for possible disappointment from the FOMC next week, but markets did not take it that way, as the dollar hit new lows vs. the Euro (and is hitting new lows this morning again ahead of the Payrolls report), and global equity markets continued to rally overnight as well.
Clearly whatever I have been looking at to gauge the potential buying power of the U.S. stock market has been wrong. Buyers were apparently lurking on a convincing break of new highs, and the small cap IWM index is also less than 1% from new highs for this year as well (though still 4% below its 2011 highs). One day this rally will run out of steam as investors refocus on deteriorating earnings and global economic weakness, but I am having a harder time seeing when that day will be.
Overnight Price Action:
- Asian equities followed the U.S. and Europe’s lead from Thursday, rallying strongly throughout the entire sessions, with the Hang Seng finishing up 3%
- Europe has maintained the risk-on tone as well, up around 1%, and SPX futures are up 0.4% this morning
- The U.S. dollar is lower vs. most crosses and commodities higher, with the exception of gold and silver
- The U.S. payrolls report at 8:30 am will be the focus for the day.