China Rate Cut Adds to Rally Fever on Wall Street

Wall Street was set Friday to extend a rally that kicked off 24 hours ago, with stock-index futures surging after China’s central bank cut interest rates and as a clutch of heavyweight tech stocks rose in the wake of strong earnings.

Investors piled into riskier assets such as equities, sending European markets sharply higher. Meanwhile, government bonds sold off. The yield on the 10-year Treasury note rose 6 basis points to 2.09%, implying a rotation from bonds to stocks.

Futures for Dow Jones Industrial Average jumped 152 points, or 0.9%, to 17,561, while those for the S&P 500 index advanced 16 points, or 0.8%, to 2,069. Futures for the Nasdaq-100 index climbed 62 points, or 1.4%, to 4,615, as shares of Amazon.com, Google parent Alphabet Inc. and Microsoft Corp. jumped about 10% apiece in premarket trade after earnings results.

The main indexes already were heading higher when just a couple of hours ahead of Wall Street’s open, the People’s Bank of China cut its one-year deposit rate by 25 basis points to 1.5%. The PBOC lowered its one-year lending rate by 25 basis points to 4.35%.

Fueled by better-than-expected corporate results and hints of more easing measures from European Central Bank President Mario Draghi, stocks finished sharply higher Thursday. The Dow industrials closed up 320.55 points, or 1.9%, at 17,489.16, the biggest point and percentage gain since Sept. 8.

With central banks in the spotlight, more attention will now turn to the Federal Open Market Committee meeting Oct. 27 and 28, and the Bank of Japan’s monetary policy meeting on Oct. 30.

Market Watch

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam