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US Markets Continue to Grind Higher


What you need to know for today's trading day.

Chinese markets were higher overnight thanks to the announcement that China's securities regulator had approved the implementation of the Shanghai-HK Connect program that will allow foreigners to invest in its domestic equity market. The Shanghai Composite (SHCOMP) closed up 2.30% and was the top performing equity index overnight.

US equities traded mostly higher in today's session. The S&P 500 (SPX) made new progressive highs, closing up 0.31% led by health care and utilities stocks. The strength in the utility sector came in spite of the sharp weakness in US Treasuries. The 10-year yield closed up 6bps to 2.36% and demand at the 3yr auction was below recent averages. Cable stocks came under pressure following President Obama's call for the US government to begin regulating internet providers like phone companies.

A report from the ECB that it had closed 2.6 billion Euros purchases of covered bonds in the prior week caused a selloff in the Euro. This is a decline from two weeks ago when the central bank had cleared a little more than 3 billion Euros. The takeaway was that there is not enough bond inventory for the ECB to purchase to reach its goal, which may require it paying a higher price for the bonds or expand the assets they will buy. The central bank seeks to expand its balance sheet by at least a trillion Euros over the next few years. This boosted global stocks as more easing from the ECB was perceived to be likely.

The energy sector was the weakest equity sector today. Early on in the morning crude oil had risen by 1.53% thanks to a weaker dollar overnight. However, all of those gains were reversed and crude finished the session down by an equal amount. Part of this was due to the revelation that the ECB may need to be more aggressive with its bond purchase program, which caused the USD rally by 50bps (due to the decline in the Euro).

Tomorrow's Financial Outlook

Tomorrow should be a slow day. US bond markets are closed for the Veteran's Day holiday, although equity markets will be open. The NFIB index of small business optimism is expected to be released in the late morning.

There is equally little economic data due to be reported overnight. Only Japan's trade balance and consumer confidence index are scheduled.

DR Horton (DRI) and Fossil Group (FOSL) are the only earnings scheduled for tomorrow. The major earnings season wrapped up at the end of last week with 449 of 500 companies in the S&P 500 having reported.

Twitter: @Minyanville

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No positions in stocks mentioned.

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