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T3's Take 3: China Follows ECB in New Stimulus Adventure


Today's financial recap and tomorrow's financial outlook.

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China Cuts Rates

This morning, China caught most investors off guard by cutting interest rates for the sixth time since November.

The news extended extended yesterday's global market rally, which was driven by Mario Draghi's dovish press conference following the ECB rate decision.

The People's Bank of China said that it is lowering its one-year benchmark lending and deposit rates by 25 basis points effective October 24. 

China also cut its reserve requirement ratio by 50 basis points. Certain banks received an additional 50 basis point uct.

This action came in the wake of slowing growth in China. Earlier in the week, China's Q3 GDP came in at 6.9%.

That beat economists' expectations for 6.8% growth, but it was below China's 7% target.

Several companies have also reported weakness in China this earnings season, including IBM (IBM) and Yum! Brands YUM)

Tech Giants Soar on Earnings

On Thursday after the close, NASDAQ heavyweights (AMZN), Google (GOOG), and Microsoft (MSFT) all beat earnings expectations and rallied hard on Friday.

Amazon saw an incredible surge in its cloud services business, while Google benefited from strong web traffic.

Microsoft shook off a middling PC market and saw surprising growth in its own cloud business, which it expects to grow sharply in the near future.

Together, these three companies account for over 20% of the NASDAQ 100 index.

Their strength resulted in significant relative strength for tech stocks, with the Technology Select Sector SPDR ETF (XLK) rallying 2.8%.

US Market Overview

The NASDAQ Composite rallied 2.3% today on the aforementioned strength in tech. 

The S&P 500 trailed with an 1.1% gain.

US stock futures rallied pre-market on the China rate cut news, and the S&P hit a morning high of 2077.79 before falling back then rebounding setting the daily high at 2079.74 around 2pm. 

Commodities performed poorly today. Cooper and crude oil, both of which are seen as tied to the Chinese economy, both fell today following short-lived pops pre-market.

Cybersecurity stocks gave up yesterday's gains on disappointing earnings from Fortinet (FTNT), and Wedbush's downgrade of key industry player FireEye (FEYE).

On the deal front, printer maker Lexmark (LXK) announced it will consider strategic alternatives to boost shareholder value.

Monday's Financial Outlook

In US economics, the New Home Sales and Dallas Fed Manufacturing Activity reports will be released.

Overseas, German IFO Business Climate, Britain BBA Home Loans, and China industrial profit numbers will be released.

In earnings, Laboratory Corp (LH), Phillips (PHG), and Xerox (XRX) report before the open.

Broadcom (BRCM), Hartford Financial (HIG), Interactive Corp (IACI), Swift Transportation (SWF), and XL Group (XL) report after the close.

No positions in stocks mentioned.
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