Thursday, December 8, 2016

The European Central Bank (ECB) this morning announced that it has decided to keep key interest rates unchanged, as well as extend its asset buyback program through December of next year. The central bank will begin to taper the amount bought back starting six months from now. Call it a dovish taper. This well-anticipated news was enough to send the euro as well as European bond yields higher. The dollar is spiking higher, too.

In a news conference currently ongoing, ECB President Mario Draghi said that he sees “inflation continuing to rise in 2018 and 2019.” This has also set the Dow and S&P 500 to stay on pace to keep bringing in new record highs. The Eurozone has been a headwind for the U.S. economy since Greece’s economy imploded and bailouts for the country ensued six years ago. The European economy in aggregate has found much more solid footing since, which is the main reason for markets rising on this news.

Initial Jobless Claims came out again before the bell, as they do every Thursday morning, with 258K new jobless claims in the week falling by 10K from the previous week. After dipping temporarily below the 250K level a couple weeks ago, we are back in the (low end of the) 250-275K range. Initial jobless claims have not exceeded 300K in 92 weeks.

In other words: more good news. What’s not to like? Ahead of Thursday’s bell, the S&P 500 is +2.75, the Dow +45 and the Nasdaq +4.75. This follows another bullish Wednesday session where the major indices rose from between 1.14% and 1.55%.

As they say, “While the music’s playing, you gotta dance.” Meaning that as long as we are firmly ensconced in a bull-market rally without headwinds (that aren’t theoretical concerns for down the road), it doesn’t make sense to not be all-in at this point. As Zacks Executive VP Steve Reitmeister tells us: The Market Is Sending You a Message. It’s up to us to listen.

Mark Vickery
Senior Editor

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