Markets cheer as European central bank says it's ready to act
US stocks moved slightly higher Thursday as markets calmed after a recent bout of turmoil. Investors were encouraged by comments from European Central Bank (ECB) policymakers, who said they were willing to provide more stimulus to the region's economy, if needed.
Investors now turn to today, Friday, when a key jobs report will be released that could help determine whether or not the United States Federal Reserve raises interest rates this month.
"There's a lot of trepidation in the market over what the Fed will do, and it's only getting worse as we get closer to the meeting," said Kristina Hooper, head of investment strategies at Allianz Global Investors. The Fed's two-day meeting begins September 16.
The Dow Jones Industrial Average added 23.38 points, or 0.1 per cent, to 16,374.76. The Standard & Poor's 500 index rose 2.27 points, or 0.1 per cent, to 1,951.13 and the Nasdaq composite fell 16.48 points, or 0.4 per cent, to 4,733.50.
The price of oil followed the stock market higher. US crude rose 50 cents to close at US$46.75 a barrel in New York. Brent crude, a benchmark for international oils used by many US refineries, rose 18 cents to close at US $50.68 a barrel in London.
In other futures trading on the NYMEX, heating oil rose one cent to close at US$1.619 a gallon, while natural gas rose 7.7 cents to close at US$2.725 per 1,000 cubic feet.
Stocks started the day solidly higher, but momentum waned as the day dragged on. Major indices dipped briefly into the red by mid-afternoon before ending mostly higher.
Investors were initially encouraged by news out of the European Central Bank, where President Mario Draghi said the bank is ready to give the Eurozone a bigger dose of stimulus should inflation across the 19-country bloc fail to pick up.
€60b a month on bonds
Along with keeping interest rates low, the ECB is pumping €60 billion a month into the region's economy through purchases of government and corporate bonds. The programme is slated to run at least through September 2016.
Draghi said the bank could increase the "size, composition and duration of the programme."
"Draghi said, in 2012, he would do whatever it takes to grow the Eurozone economy and he's holding to that promise," said Quincy Krosby, a market strategist at Prudential Financial.
European markets jumped on the news. Germany's DAX closed up 2.7 per cent, France's CAC-40 rose 2.2 per cent and UK's FTSE 100 rose 1.8 per cent.
At the same time the ECB is stimulating Europe's economy, the Federal Reserve could raise US interest rates for the first time since the financial crisis. While chances of a September interest rate increase have diminished because of signs of weakening global growth and a sell-off in Chinese stocks, many believe the growing US economy may be ready to withstand higher interest rates.
Friday's jobs report for August, a key gauge of how the US economy is doing, could play a big role in guiding that decision by the Fed. Economists are forecasting that employers created 220,000 jobs last month and that the unemployment rate fell to 5.2 per cent.
In other markets Thursday, US government bond prices rose. The yield on the 10-year Treasury note fell to 2.16 per cent from 2.19 per cent late Wednesday. The euro fell to US$1.1134 from US$1.1238. The dollar fell to 119.91 yen from 120.24 yen.
The price of gold fell US$9.10 to settle at US$1,124.50 an ounce, silver rose four cents to US$14.70 an ounce and copper rose six cents to US$2.39 a pound.