World stock markets continue to respond favorably to yesterday’s boost of confidence from the Fed. The US central bank announced that it plans to start tapering asset purchases this month by $15B per month, suggesting eight months of tapering to wind down the program in June of 2022, which is in line with previous Fed member hints and market expectations. Investors around the world have viewed this as a positive sign, that the economy is finally strong enough to stand on its feet without so much emergency assistance.
On this news, US indices finished yesterday with gains of 0.3% to 1.0%, and most importantly, the Russell 2000 small cap index broke out of an eight-month sideways range to a new high, confirming the recent new highs by large cap indices and indicating that breadth/participation in the current market advance is increasing. Speaking of breadth, overseas indices have also been climbing in response to the Fed news overnight with the Nikkei up 1.0%, the Hang Seng rising 0.8%, and the Dax gaining 0.5%. The FTSE is trailing behind with a 0.25% gain after the Bank of England decided not to make any changes to interest rates or its asset purchase target, staying dovish relative to the other main English speaking central banks and raising questions about the health of the UK economy.
Earnings reports were mixed overnight with some significant beats and significant misses. Companies who exceeded expectations include: Canadian Natural Resources (positive earnings and a 25% dividend increase), Qualcomm ($2.55 vs street $2.26, up 10.3% premarket), Booking Holdings ($37.70 vs street $32.90) and Electronic Arts ($1.49 vs street $1.17). The biggest name reporting disappointing results overnight was Moderna ($7.70 vs street $9.05, down 13.2% premarket).
Crude oil prices are on the rise this morning with Brent up 2.1% and WTI up 1.9% ahead of today’s OPEC+ meeting. Investors are expecting the group to continue restoring production at a rate of 400K bbl/d per month despite calls from the US and others to accelerate production increases. Some OPEC+ member countries have been having trouble making higher targets as it is, and the group may be leaving room for Iran to eventually return to the market with nuclear talks resuming near the end of this month. It’s a good day so far for commodities in general with Natural gas, copper and gold all up 1.1% and platinum up 2.2%.