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The Markets This Week

January 28, 2015 | Weekly Commentary

They’re saying that in markets ’round the world, now that Mario Draghi, the European Central Bank’s president, has announced a massive bond-buying program to help Europe shake off its economic malaise. The news spurred equity markets to rally, and helped U.S. stocks soar in a holiday-shortened week.

The beaten-down energy sector recovered somewhat, with stocks gaining 2%, even though crude oil prices fell 7% last week, to a new low of $45.59 per barrel. Tech stocks rose 3%. With the widely anticipated ECB move out of the way, investors are likely to turn their focus to fourth-quarter earnings releases.

Draghi announced that the ECB will buy €60 billion ($67 billion) a month in assets, including government bonds, beginning in March and running until September 2016, at least. This quantitative easing program, which would expand the central bank’s balance sheet by about €1.1 trillion, met market expectations. Central-bank QE policy moves support equities by depressing bond yields, making stocks more attractive.

The Dow Jones Industrial Average gained 161 points last week, or 1% to 17,672.60. The Standard & Poor’s 500 index rose 32 to 2,051.82. The Nasdaq Composite tacked on 124.70 points, or 2.7%, to 4757.88. The MSCI world stock market index jumped.

The market was already up from the previous Friday in anticipation of ECB move, notes Robert Pavlik, chief market strategist at Banyan Partners, suggesting investors felt the early January drop had driven prices down to where the bull’s “buy on dips” reflex kicked in again. There was no 10% correction in either 2014 or 2013.

(Source: Barrons Online)

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