Stocks on Wall Street rose on Wednesday ahead of Thursday’s big European Central Bank meeting, at which the ECB is expected to announce a quantitative easing program to fight deflation and faltering economic growth in the eurozone.
First, the scoreboard:
- Dow: 17,555.8, +40.5 (+0.2%)
- S&P 500: 2,033.3, +10.8, (+0.5%)
- Nasdaq: 4,668.7, +13.9, (+0.3%)
And now, the top stories on Wednesday:
1. The biggest story on Wednesday came from Canada, where the Bank of Canada unexpectedly slashed the main overnight interest rate to 0.75% from 1%, a move that sent Canadian stocks higher and the Canadian dollar weaker. In a statement, the Bank of Canada said the move to cut rates followed the decline in the price of oil, which the BoC said will be negative for growth and underlying inflation in Canada.
2. The surprising move from Canada comes ahead of Thursday’s highly anticipated European Central Bank meeting, at which the ECB is expected to announce a quantitative easing program. Reports in The Wall Street Journal and Bloomberg on Wednesday said the program will likely involve the ECB buying €50 billion worth of bonds monthly for at least one year.
3. There was also news on Wednesday out of Russia’s central bank, with Russian newspaper Izvestia reporting that the central bank will look to cut interest rates from their current level of 17% after the sharp increase in rates enacted in December “did not bring the expected result.”
4. Oil rebounded some on Wednesday after dropping more than 5% on Tuesday, and in a note to clients analysts at Bank of America Merrill Lynch said that client inflow to energy stocks last week was the largest since the firm began collecting the data in 2008. Oil prices are down more than 50% from their summer highs, and now it looks like the dip buyers might be trying to call a bottom.
5. On Wednesday, we got some more jawboning out of OPEC, with OPEC secretary general Abdalla El-Badri telling Bloomberg TV that oil will not go to $US20 or $US25 a barrel, but will stay where prices are now.
6. Tootsie Roll CEO Melvin Gordon passed away at the age of 95, according to an announcement from the company, and his wife Ellen, currently the company’s president and COO, will take over his responsibilities as chairman and CEO. Following the news, shares of Tootsie Roll rose more than 6%.
7. In the housing market, we got some upbeat news as housing starts in December rose 4.4% to an annualized pace of 1.09 million, topping expectations for a more modest rise of 1.2% and rising to the best pace since 2008. Building permits, however, disappointed. In a note following the report, Chris Rupkey at Bank of Tokyo Mitsubishi wrote that this report shows, “The last piece of the economic puzzle is starting to come together now as housing construction, the sector of the economy that collapsed and made the Great Recession great, is coming back.”
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