The stock markets in the United States gained again today after the European Central Bank (ECB) announced an expanded quantitative easing (QE) program. The markets also benefited from the rally of equities in the banking and transportation sector amid positive earnings.
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ECB President Mario Draghi announced the decision of the central bank to increase its asset purchasing program to €60 billion per month until 2016. The ECB will primarily target government bonds, government agencies and large corporation in Europe. The central bank’s decision came after maintaining its benchmark rates at record lows.
The ECB was compelled to expand its asset purchasing program due to an almost stagnant economy and the risk of deflation in the region.
Commenting on the central bank’s move, John Fox, director of research at Fenimore Asset Management told Bloomberg, “This is a step in the right direction. It had been widely anticipated that they were going to do something, so they’re not surprising the market, but they still gave investors something positive.”
[drizzle]On the other hand, Karyn Cavanaugh, a senior market strategist at Voya Investment Management opined that the “markets are expecting big” and the announcement of the ECB “sound a pretty big program.” Cavanaugh added, “We were all expecting it and finally we got what we were looking for.”
Meanwhile, the United States Department of Labor reported that the number of people who filed for unemployment benefits declined by 10,000 to 307,000 for the week ending January 17.
Leon Cooperman, hedge fund manager of Omega Advisors commented that stocks will continue to gain as the economy improves and corporate profits increase. He said, “There’s no basis to call for a market peak. It could be a couple more years.”
U.S. Markets
- Dow Jones Industrial Average (DJIA) – 17,820.11 (+1.51%)
- S&P 500- 2,063.38 (+1.54%)
- NASDAQ- 4,750.40 (+1.78%)
- Russell 2000- 1,189.05 (+1.96%)
European Markets
- EURO STOXX 50 Price EUR- 3,322.65 (+1.62%)
- FTSE 100 Index- 6,796.63 (+1.02%)
- Deutsche Borse AG German Stock Index DAX- 10,435.62 (+1.32%)
Asia-Pacific Markets
- Nikkei 225- 17,329.02 (-0.49%)
- Hong Kong Hang Seng Index- 24,522.63 (+0.70%)
- Shanghai Shenzhen CSI 300 Index- 3,567.61 (+0.53%)
Stocks in Focus
The stock price of Avon Products surged more than 14% to $8.65 per share due to the report that the company is in talks with TPG Capital regarding a potential takeover deal, according to report from Dealreporter.
The shares of eBay gained almost 7% to $57.08 per share after the company announced that it reached a standstill agreement with activist investor Carl Icahn. The company is also reducing its workforce by 7% or 2,400 positions, buying back shares and exploring options for its enterprise unit including a sale or initial public offering.
Southwest Airlines rose 8% to $45.35 per share after reporting better-than-expected earnings for the fourth quarter. The company posted net income (excluding special items) of $404 million or $0.59 per share compared with the $0.55 per share consensus estimate.
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