Morning Minutes

Overseas Indices Join The Rally; US Bank Stress Test Results This Afternoon



US markets shrugged off two weeks of fretting about central banks continuing to raise interest rates yesterday. Instead, investors chose to focus on stronger than expected US New Home Sales and Durable Goods Orders as signs of a robust economy and a positive environment for corporate earnings. Building on recent strong housing data, US mortgage application growth increased by 3% last week.

This morning, US index futures are trading flat to down 0.4% as investors digest yesterday’s gains of 1.6% for the NASDAQ, 0.6% for the Dow, which was held back by poor results from Walgreens Boots, and 0.8% for the S&P/TSX.

Overseas markets soared overnight and into the morning, playing catch up, with gains of 2.0% for Tokyo, 1.1% for Sydney, 0.8% for Frankfurt and 0.6% for London. Commodities are mixed with WTI Crude Oil climbing 0.1% but Copper falling 1.0%.

Fed Chair Powell is speaking again today at 9:30 am EDT, which may attract some attention but may not have much of an impact on markets unless he deviates from the hawkish tone of last week’s testimony to Congress, or his post-meeting press conference from two weeks ago. Bank of England Governor Bailey, and European Central Bank President Lagarde are also speaking this morning.

Results of the latest round of US bank stress tests are due after the close today. Investors may look to these results for an indicator of the overall health of the banking system and to see if there are any flareups or red flags at big banks. Historically these results, if positive, have been followed by a round of dividend and share buyback announcements.   

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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