Nasdaq Gained The Most Ground Following Weaker Returns

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Commenting on today’s trading looking at what the Nasdaq gained, Gorilla Trades strategist Ken Berman said:

While small-caps were relatively strong for the third day in a row, all sectors pushed higher today,   The optimism regarding the trade negotiations with China remained the key driver behind today’s rally, and since investors shrugged off the President’s latest attack against the Fed, the major indices could hit new all-time highs even before the looming Fed meeting.

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The major indices all finished higher for the first time this week, as stocks resumed their advance following two choppy sessions thanks to the improving global sentiment and the continued rally in Asia and Europe. The Dow was up 228 or 0.9%, to 27,137, the Nasdaq gained 86, or 1.1%, to 8,170, while the S&P 500 rose by 22, or 0.7%, to 3,001. Advancing issues outnumbered decliners by a 3-to-1 ratio on the NYSE, where volume slightly below average.

The large-cap benchmarks all hit new five-week highs thanks to today’s broad rally, and following two days of weaker-than-average returns, the Nasdaq gained the most ground. The Russell 2000 outperformed even the tech benchmark, adding more than 2%, and small-caps are up by 5% on average this week. That, together with the surge in global risk assets confirms that the bull market is back in earnest. The Volatility Index (VIX) also at its lowest level since late-July, and on another positive note, the ‘fear gauge’ re-entered its pre-correction range today.

Apple’s (AAPL) iPhone 11 launch provided major surprises for analysts even as it was one of the most leaked events in recent memory. While the devices and services that the Cupertino-based giant unveiled were very similar to the leaked ones, their pricing raised eyebrows across the globe. Apple addressed the decline in iPhone unit sales by lowering prices, while launching a relatively cheap streaming service. Both steps are highly unusual from the firm, but investors seem to like the change in strategy. The company’s shift towards services is gaining momentum and the optimism concerning the new strategic focus propelled the stock to a fresh eleven-month high today.

A tumultuous session could be ahead for traders tomorrow, since apart from the release of the highly anticipated U.S. Consumer Price Index (CPI), the European Central Bank’s (ECB) monetary meeting could also have a major impact on asset prices. The core CPI is expected to come in at 0.2%, below last month’s reading of 0.3%, while the headline CPI is forecast to drop even more due to the steep drop in the price of gasoline in August. The weekly number of new jobless claims will come out ahead of the opening bell too, while the Eurozone industrial production could move markets even before the ECB meeting.

The ECB's meeting will likely define the trends in financial markets until next Wednesday’s Fed meeting, and especially bonds and currencies could experience wild swings tomorrow in pre-market trading. Thanks to the renewed trade optimism and the better-than-expected economic releases of the past two weeks, stocks seem to be safe, even in the case of a hawkish surprise from the Central Bank. Should the Euro appreciate compared to the dollar in the wake of the ECB's announcements, U.S. equities could even get a boost, as the dollar remains uncomfortably strong for the export-focused domestic companies. Stay tuned!

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