S&P Nears All Time High, Global Stocks Rally As Dovish Yellen Unleashes Animal Spirits
By Tyler Durden
Stock whisperer Yellen said all the right things yesterday, when she sounded more optimistic than pessimistic on the economy but while the economy is “strong” it is most likely not strong enough to weather a rate hike in the immediate future. As a result, the S&P 500 climbed toward a record on Monday (and continued rising overnight) after Yellen said she expects to raise interest rates only gradually and held off from specifying any timeframe, a shift from her May 27 stance that a move was probable “in the coming months.” This was interpreted that both a June and July rate hike are now off the table, with September odds rising modestly.
And in a world where a hawkish Fed is bullish but a dovish Fed is even more bullish, stocks took their cue from Janet and sprang higher first in the US, and then across the globe, rallying with emerging markets because as Bloomberg put it, Yellen won’t “derail the recovery with a premature interest-rate increase.” If by premature BBG means a second hike one in a decade, then yes.
Of course, what Yellen really meant is to give algos a green light to trigger all stops at the new 2016 highs, and then to continue to the fresh all time high in the S&P500, which as of this moment is less than 1% away, and will likely be taken out today.
Thanks to Yellen, the MSCI All Country World Index headed for its strongest close since April, led by gains in energy companies and raw-materials producers. Emerging-market stocks and currencies advanced for a fourth day. The Bloomberg Commodity Index snapped a four-day gain that had pushed it to a bull market. The South Korean won surged the most in six years, and the currencies of Australia and India also rose after the nations’ central banks kept interest rates unchanged. The pound advanced as a poll showed the campaign to keep Britain in the European Union ahead. The odds of a rate hike by July dropped to 22 percent in the futures market, after halving to 27 percent on Friday as a report showed U.S. jobs growth in May was the weakest in almost six years. S&P 500 futures advanced 0.3%, indicating U.S. equities will extend gains on Monday that were propelled by Yellen’s remarks, and close at new 2016 highs, if not new all time highs entirely.
“It seems likely that we will get at most one rate hike this year and that’s positive for equities and commodities,” said Ric Spooner, chief analyst at CMC Markets in Sydney. “Of the beaten-down commodities, the oil market is the best place. We’re already seeing supply cutbacks.”
While a Brexit will ultimately not be allowed, analysts continue to pay attention to the latest polls out of the UK. According to the latest Times/YouGov poll, 43% would vote to remain in EU and 42% would vote to leave. ORB/Telegraph poll showed 48% would vote to remain in EU and 47% would vote to …read more
Source: S&P Nears All Time High, Global Stocks Rally As Dovish Yellen Unleashes Animal Spirits
