Stocks climbing after ECB rate cut

optionMONSTER

Stocks are inching higher after the European Central Bank cut interest rates as expected.

S&P 500 futures are up about 0.15 percent after closing at another record high yesterday. European indexes are accelerating their higher after the ECB news, led by Italy's 1 percent gain. Asia was mostly positive overnight after service-sector data showed slow but steady growth in China. Shanghai rose 0.8 percent, Mumbai advanced almost 0.9 percent, and Tokyo added 0.1 percent.

The ECB cut its key lending rate to 0.15 percent from 0.25 percent and lowered its deposit rate to -0.10 percent, in effect charging banks to keep money at the central bank. Attention now turns to weekly jobless numbers at 8:30 a.m. ET and natural-gas inventories two hours later. The Labor Department's non-farm payrolls report is another key event tomorrow.

Both stocks and the economy have been characterized by a pattern of rotating strength, with one industry or region compensating when another weakens. Employment and forward-looking indicators have been strong in the United States, offsetting weak economic growth. China has also been showing signs of life at the same time that Europe, the former leader, weakens.

Perhaps most importantly, Japan is starting to rally again and the Russell 2000 is trying to climb from long-term support at its 200-day moving average. Both trends could lift the S&P 500 if they continue.

Our researchLAB market scanner has also been finding rays of light in the moribund financial sector, with life insurers emerging as the strongest group in the last week. Big-box retailers have also gained more in the last five sessions than they have in the last 12 months. Loan servicers, former high-fliers cut down early this year, are also coming back to life. Airlines have remained strong throughout.

In company-specific news, Ciena is rallying 14 percent after earnings, revenue, and guidance all beat forecasts. Halozyme Therapeutics is indicated higher by 11 percent after the Food and Drug Administration allowed it to resume testing its PEGPH20 compound for the potential treatment of pancreatic cancer. Costco rose almost 1 percent on better-than-expected sales in May. Joy Global rose 2 percent after profit beat and revenue missed.

Commodities are mostly lower as oil, precious metals, and copper decline fractionally. There are no big movers in the currency markets.


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