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Investor Optimism, Euro Zone Data Push S&P 500 to Record Levels

Nov 24,2014  Market News  Comment: 0

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New York City, New York – (StockNewsDesk) – 11/25/2014 — The US markets continued to rally, hitting multiple highs. Investor optimism in the US economy, supported by better than expected economic numbers from the euro zone, is primarily responsible for the rally. On Friday, Chinese lawmakers decided to lower one-year lending and deposit rates while the European Commission’s chief Mario Draghi expressed interest in widening the stimulus. These events combined to spur the global rally taking place.

United States’ major index Standard & Poor’s (S&P 500) increased nearly 1% last week on the back of economic indicators that impressed investors. Additionally, since last month, the index has grown over 11%. The index had plummeted nearly 7.5% on the euro zone’s growth worries before rebounding sharply. Investment in equities has seen robust capital inflows. The stock valuation of the S&P 500 equities reached a record level of 17.2 times, compared to earlier month’s level of 15.5. Moreover, the S&P 500 has closed its trading day north of five-day moving average for 26 weeks in a row. For the first time in history, the S&P 500 may set a record if the index closes above the five-day level for this week, too.

Services Purchasing Managers’ Index (PMI) showed signs of sluggishness in the economy. Service PMI declined marginally to 56.3 this month, compared to October’s reading of 57.1. Since June, the services PMI has gradually increased and reached a high of 61. However, post June, the index has shown signs of sluggishness. Any reading above the 50-levels is considered a positive movement. Gauge measuring services sector for new businesses declined to 55.9 in November compared to October’s reading of 57.8. Manufacturing PMI declined to 56.1 in November compared to 57.2 recorded in October. Despite these sluggish numbers, investors continue to take a positive stance toward the US economy.

Investor Optimism, Euro Zone Data Push S&P 500 to Record Levels

Today’s markets were largely supported by the euro zone’s better than expected economic indicators. The largest economy of the euro zone, Germany, provided numbers that beat investor expectations. German Business Expectations for the month of November increased to 99.7, well above expectations of 95.5 and October’s reading of 98.3, while German Ifo Business Expectations increased to 104.7 compared to the Street’s forecast of 103.0. These economic indicators came in a day-after fter Draghi, ECB Chief, widened the possibilities of expanding the bond-purchase program. Draghi believes that the bond-purchase program holds the key to economic growth of the euro zone area.

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