By CCN.com: The Dow and broader U.S. stock market opened sharply higher on Tuesday after European Central Bank (ECB) officials signaled that a new round of stimulus was on the horizon.
Dow Surges After Open
All of Wall Street’s major indexes opened higher on Tuesday, reflecting a strong pre-market fro Dow futures. The Dow Jones Industrial Average surged 152.64 points, or 0.6%, to 26,265.17.
The broad S&P 500 Index of large-cap stocks advanced 0.6% to 2,908.03. Gains were primarily concentrated in communication services, energy and health care stocks. On the opposite side of the ledger, financials and materials opened sharply lower.
Surging communication stocks drove the Nasdaq Composite Index sharply higher after the open. The tech-driven index surged 1% to 7,919.23.
Easy Monetary Policy Gets Easier
European equities surged on Tuesday after ECB President Mario Draghi indicated that a new central-bank stimulus drive could be implemented next month to rescue the regional economy from dismal growth.
By slashing interest rates and tweaking the parameters of its quantitative easing program, the ECB will effectively weaken the euro and help the export-oriented economy remain competitive.
Those critical of the ECB’s policies argue that years of record stimulus have done little to supercharge the Eurozone economy. The euro area economy appears to have peaked in late-2017-early-2018. Annual growth has declined by more than half over the past year.
The Federal Reserve is expected to join the chorus of central banks calling for easy monetary policy amid ongoing trade tensions with China. Talks between the two countries broke down unexpectedly last month after China reneged on a trade deal that the Trump administration said was imminent. Now, China is playing hard ball and central bankers in Washington are looking to hedge against the risk of a drawn-out trade war that will impact the Dow.
The Federal Reserve will conclude its two-day policy meeting in Washington, D.C. on Wednesday. The official policy statement could provide tangible clues about whether officials are prepared to slash interest rates as early as July.
Last modified: September 23, 2020 12:47 PM