Thursday's Stock Market Open: US Equities Begin New Year Higher After China Eases Monetary Policy

KEY POINTS

  • China’s central bank released more than 800 billion yuan ($114.9 billion) into its financial system
  • China and Hong Kong markets surged overnight
  • Initial jobless claims decreased by 2,000 last week

U.S. stocks picked up 2020 where they left off in 2019 by opening higher Thursday after China’s central bank released billions of dollars into its financial system.

The Dow Jones Industrial Average gained 120.56 points to 28,659.00 while the S&P 500 rose 15.02 points to 3,245.80 and the Nasdaq Composite Index added 60.57 points to 9033.18.

The Chinese central bank, the People’s Bank of China, said on Wednesday that it will reduce its reserve requirement ratio for all banks by 0.5%, effective Jan. 6, thereby releasing more than 800 billion yuan ($114.9 billion) into its financial system. In December, Chinese Premier Li Keqiang vowed to stimulate more bank loans to the country’s struggling small companies.

Traders will also look for any new developments on the trade deal front. President Donald Trump on Tuesday said the phase one trade deal with China will be signed on Jan. 15 at a ceremony at the White House. He said he will later fly to Beijing to begin talks on phase two.

Initial jobless claims decreased by 2,000 to a seasonally adjusted 222,000 for the week ended Dec. 28, the Labor Department said Thursday. Economists had forecast 225,000 new claims for last week.

“One of the biggest risks today may be that stocks have already priced in much of the good news,” said Bob Doll, senior portfolio manager at Nuveen Asset Management. “Stock prices can still climb higher, but we don’t expect results anywhere near 2019.”

“Equities begin [2020] on firm ground building on the momentum from last year,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities, in a note. “[But] it’s hard to imagine 2020 offering the same type of returns of last year.”

Overnight in Asia, markets finished mixed. China’s Shanghai Composite surged 1.15%, while Hong Kong’s Hang Seng jumped 1.25%, but Japan’s Nikkei-225 dropped 0.76%.

In Europe markets traded higher, with Britain’s FTSE-100 up 0.99%, France’s CAC-40 up 1.02% and Germany’s DAX surging 1.25%

Crude oil futures gained 0.13% at $61.14 per barrel and Brent crude rose 0.36% at $66.24. Gold futures gained 0.48%.

The euro fell 0.75% at $1.1179 while the pound sterling dropped 0.72% at $1.3155.

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