Stocks up on surprise ECB rate cut


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Equity indexes have turned green this morning after a surprise rate cut by the European Central Bank.

S&P 500 futures are up about one-third of a percent after being slightly negative, while European markets have also reversed earlier losses and are now up by more than 1 percent. Asia fell in the overnight session, led by declines of more than half a percent in Tokyo and Hong Kong.

The next big event comes at 8:30 a.m. ET when the Commerce Department releases third-quarter GDP. Economists expect growth of 1.9 percent, down from 2.5 percent in the preceding three months. It isn't clear how investors will react to the news because a strong reading could trigger fears that interest rates will increase in the United States. Initial jobless claims will be announced at the same time.

The S&P 500 has been consolidating at all-time highs for more than a week after a sharp rally in mid-October. The index has held above its 10-day moving average during that time, which suggests short-term momentum remains bullish.

Our researchLAB market scanner shows sentiment favoring industrial and consumer-related stocks recently, while the energy and financial sectors have lagged. Iron- and steel-related stocks and solar energy have been especially strong.

The ECB's rate cut is sending the euro sharply lower in foreign-exchange trading. The Japanese yen is also down slightly against the greenback. Brent crude oil is down 1 percent, which could hurt refinery stocks. Most other commodities are little changed, although natural gas is up almost 2 percent.

European lenders such as Deutsche Bank, Credit Suisse, and Banco Santander are rising on the rate cut. In other company-specific news, Qualcomm will likely fall after issuing weak guidance, while American Eagle Outfitters and Transocean are rallying on strong quarterly reports. Tempur Sealy and Stratasys will probably climb as well, after results beat expectations.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing , Options

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