Wednesday, November 30, 2011

STOCKS EXPLODE HIGHER AFTER LATEST ATTEMPT TO SAVE THE WORLD: Here's What You Need To Know, November 30, 2011

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Wednesday, November 30, 2011

STOCKS EXPLODE HIGHER AFTER LATEST ATTEMPT TO SAVE THE WORLD: Here's What You Need To Know

Sam Ro | Nov. 30, 2011, 4:00 PM | 977 | 8

Central banks around the world to the rescue?

First, the scoreboard:

Dow: +488.9 pts, +4.2%
S&P 500: +51.7 pts, +4.3%
NASDAQ: +104.8 pts, +4.2%

And now, the top stories:

Global coordinated intervention. The Federal Reserve, the European Central Bank, the Bank of England, the Bank of Japan, the Bank of Canada, and the Swiss National Bank announced they would lower the cost of swapping dollars. Specifically, they are cutting the U.S. dollar liquidity swap rate by 50 basis points. This is an effort to boost liquidity in the European bank funding markets. The announcement, which came before the markets opened, caused futures to roar higher.
In case that wasn't enough, the Fed also reminded us that it could still do much more: "[W]ere conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses."
In other market moving central bank actions, the People's Bank of China cut its reserve ratio requirement for banks by 50 basis points. In other words, the PBOC reduced the amount of money banks have to keep on hand, which should encourage more lending activity. This move is likely to appease those fearing a hard landing for the slowing Chinese economy.
U.S. financials were among the big winners today. This despite last night's S&P ratings cuts, which included Bank of America (+7.3%), Citigroup (+8.9%), and Morgan Stanley (+11.1%). S&P also cut Wells Fargo (+7.4%) and Goldman Sachs (+7.9%) and slapped negative outlooks on the two banks.
Metals were also among the major movers today. Gold jumped 2% and copper soared 6%. Mining stocks were big winners today. Rio Tinto and Freeport McMoran jumped 9.2% and 8.6%, respectively.
The U.S. saw three pieces of good economic data this morning. According to ADP, companies added 206k private payrolls in November, crushing economists estimate of 130k. This is encouraging ahead of Friday's big BLS jobs numbers.
The Chicago PMI came in at 62.6, beating the estimate of 58.5. October pending home sales jumped 10.4%, smashing the estimate of of 2.0%.
The Fed Beige Book of economic anecdotes was released this afternoon. It showed 11 of 12 Fed districts were showing slow to moderate growth. The only exception was the St. Louis district, which includes parts of Arkansas, Illinois, Missouri, Indiana, Kentucky, Tennessee, and Mississippi.
There were few losers in the stock markets today. Netflix was the biggest loser in the S&P 500, falling 4.5%.
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