S&P 500 back in black for 2015, Nasdaq leaps 2.3%
Wall Street ended the week on a bullish note as stocks surged Friday after strong earnings results from the key tech sector and an interest rate cut by China to stimulate flagging growth in the world's second-biggest economy.
News that China's central bank was cutting its benchmark lending rate by a quarter of a percentage point gave stock markets around the globe a boost as Wall Street builds on Thursday's big rally, where the Dow Jones industrial average jumped more than 320 points and other major U.S. stock indexes rose 1.7%.
The Dow added to Thursday's gains as it rose about 158 points, or 0.9%. The Standard & Poor's 500 stock index jumped 1.1% to 2075, leaping back into positive territory for the year after dropping more than 12% this summer in the market's first official price correction in four years.
The Nasdaq composite index finished up 2.3% to 5032, after getting a big lift from better-than-expected earnings from a trio of blue-chip tech stocks after last night's closing bell.
The Dow posted its fourth straight week of gains, its best streak so far this year.
Andrew Adams of money-management firm Raymond James describes the market's big rally as a "stampede," which he says is often "very tough to stop once they get going and tend to leave any stragglers in the dust."
China's latest move to spur economic activity and keep growth near or at its 7% annual target this year follows hints yesterday from the European Central Bank that they, too, are considering providing more stimulus to the eurozone economy later this year to offset flagging growth due to weakness in emerging markets amid a slowdown in China. At home, the Federal Reserve looks like it has shelved its plans to hike short-term interest rates this year for the first time in nearly a decade. Wall Street now sees the first Fed rate hike early in 2016.
"The main factor behind the global ebullience," adds Adams of Raymond James, "appears to be a collective confidence that the low-interest rate environment is going to continue for the foreseeable future."
The combination of earnings coming in better than expected and a renewed push by global central bankers to re-inflate slowing economies has been greeted positively today by investors around the globe.
Tech stocks jumped following big earnings beats last night from Amazon.com (AMZN), Microsoft (MSFT) and Google parent Alphabet (GOOGL). Shares of Microsoft surged 10%, Alphabet shot up 5.6% and Amazon rose 6.2%.
The sizes of the moves caught the attention of traders. "We simply cannot remember a time outside the extremely volatile days of the financial crisis, when three stocks so large were all set to open up so much on the same day," Paul Hickey, co-founder of Bespoke Investment Group, told clients in a report before the opening bell.
Stocks rose overnight in Asia, but the China rate cut news did not break until after markets in Asia closed. Still, stocks rallied sharply. Japan's Nikkei 225 rose 2.1%. Hong Kong's Hang Seng index was 1.3% higher. And shares in mainland China's Shanghai composite jumped 1.3%.
China's central bank took a number of steps to shore up its weakening economy. It cut its one-year lending rate to 4.35% from 4.6%. It also slashed despite rates by a quarter point to 1.5%. In addition, it reduced the amount of cash banks are required to have on hand. The moves are designed to spur lending and borrowing in an effort to jumpstart growth.
