Morning Brief: S&P 500 hits new record high amid sliding Dollar Index

Dow Jones
Dow Jones

The S&P 500 index climbed to its highest level ever yesterday, even as investors continue to worry about the state of the U.S. economy. The index ended the day at $3,390, which is its highest level on record. Today, futures tied to the index are also up by about 0.10%. Similarly, Dow Jones and Nasdaq 100 futures are up slightly.

The S&P 500, Nasdaq 100 and Dow Jones have been in an upward trend in the past three months. These gains have mostly been because of technology stocks, such as Apple and Microsoft. Cyclical assets like energy and financials further pushed these indices.

Analysts believe that the rally in U.S. shares has been due to Federal Reserve policies, as the institution lowered interest rates to a record low. It has also unleashed an open-ended quantitative easing program that has led to a sharp increase of its balance sheet.

Most importantly, the bank has started to buy corporate bonds, which has provided significant support to companies. At the same time, these policies have led to the weakness of the US dollar, which tends to be supportive of equities. The chart below shows that the S&P 500 index has been in a strong upward trend and that yesterday it moved above its February highs.

S&P 500 index has turned positive for the year

S&P 500

In Asia, the Nikkei 225 index rose by 0.30%, even after Japan released weak export and machinery order data. In China, the Hang Seng and Shanghai Composite index dropped by 0.85% and 0.77%, respectively.

DAX Index, FTSE 100, and Stoxx 50 unchanged

European equities ended the day in the red yesterday, with the DAX index, FTSE 100 and Stoxx 50 falling by 0.30%, 0.83%, and 0.70%. This weakness was partly because of stronger euro and sterling. The euro rose by more than 0.50% against the dollar while the sterling rose by more than 1%. Stronger local currencies tend to affect local stocks, especially of countries that do a lot of business overseas.

Today, futures tied to the DAX index are up by 0.12% while those tied to the FTSE 100 and Euro Stoxx 50 are up by 0.20% and 0.35%, respectively. Today, these indices will react to corporate earnings, especially from the United States. Among the companies that will release their earnings are Lowe’s, Target, Sprint, and NVIDIA. The chart below shows that the DAX index has been in a tight range in recent weeks.

Economic calendar

The FOMC minutes that will come out at 18:00 GMT will be the highlight of the day. In these minutes, the Fed will reveal the deliberations that took place in its July 31st meeting. At 14:30, the Energy Information Administration (EIA) will release the crude oil inventories data. Analysts polled by Reuters expect that the US will have a 2.67-million-barrel drawdown. Also, we will receive inflation data from the European Union and Canada.

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DAX Index Chart

DAX Index

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