Overseas Stimulus News Leads To Early Strength On Wall Street - U.S. Commentary

(RTTNews) - With traders expressing optimism about overseas stimulus, stocks moved sharply higher at the start of trading on Friday. The Dow and the S&P 500 jumped to new record highs, although buying interest has waned since the open.

Currently, the major averages remain firmly positive but off their highs for the young session. The Dow is up 139.93 points or 0.8 percent at 17,858.93, the Nasdaq is up 30.32 points or 0.6 percent at 4,732.19 and the S&P 500 is up 15.94 points or 0.8 percent at 2,068.69.

The initial strength on Wall Street was partly due to news that China's central bank cut its benchmark interest rates for the first time since July of 2012.

The People's Bank of China said the one-year lending rate was reduced by 0.4 percentage points to 5.6 percent, while the one-year deposit rate was lowered by 0.25 percentage points to 2.75 percent.

The move, which comes amid some signs of sluggishness in the Chinese economy, has contributed to a jump in most commodities prices.

Peter Boockvar, managing director at the Lindsey Group, said, "The cost of credit in China is now modestly lower but we'll have to see whether it helps the supply of it and demand for it."

"Big state companies have easy access to credit and it's why Chinese authorities have taken steps to help small and medium sized businesses," he added.

Positive sentiment was also generated by comments from European Central Bank President Mario Draghi indicating that the bank may broaden its asset purchases in an effort to boost inflation.

"We will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us," Draghi said.

He added, "If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialize, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases."

Boockvar said the global monetary party will be "full on and all in" assuming Draghi follows through on government bond purchases.

However, the focus on developments overseas comes amid a quiet day on the U.S. economic front, potentially leading to below average trading activity.

Steel stocks have shown a substantial move to the upside in early trading amid optimism about the outlook for Chinese demand.

The NYSE Arca Steel Index has surged up by 4.2 percent, continuing to regain ground after ending Wednesday's trading at its lowest closing level in over a year.

Early strength is also visible among gold and energy stocks, which are moving higher along with their associated commodities prices. Chemical, housing, and defense stocks are also seeing notable strength.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index climbed by 0.4 percent.

The major European markets have shown stronger moves to the upside on the day. While the U.K.'s FTSE 100 Index has jumped by 1.4 percent, the German DAX Index and the French CAC 40 Index are surging up by 2.5 percent and 2.7 percent, respectively.

In the bond market, treasuries are showing a lack of direction as traders digest the news from overseas. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 2.328 percent.