S&P 500; US Indexes Fundamental Daily Forecast – Rising Yields Good News for Bank Stocks

The major U.S. stock indexes surged on Wednesday with the blue chip and benchmark indexes driven higher by a strong performance in bank stocks which rose in reaction to rising U.S. interest rates.

In the cash market, the benchmark S&P 500 Index settled at 2772.35, up 23.55 or +0.86%. The blue chip Dow Jones Industrial Average closed at 25146.39, up 346.41 or +1.40% and the tech-based NASDAQ Composite finished at 7688.45, up 50.59 or +0.66%.

Bank stocks, J.P. Morgan and Goldman Sachs were among the biggest contributors to the 346.41 gain in the Dow Jones Industrial Average. A 1.9 percent gain in the financials sector helped boost the S&P 500 Index 0.86 percent higher.

Tech stocks continued to perform well with the NASDQQ Composite closing 0.7 percent higher. While FANG stocks carried the market higher earlier in the week, it was the chipmakers that outperformed on Wednesday.

Gains may have been limited by a small loss in shares of Google-parent Alphabet which closed 0.4 percent lower. The catalyst behind the weakness was a report by the Financial Times which said the European Union was set to unveil a negative finding from a probe on Google.

Forecast

U.S. futures markets are grinding higher early Thursday, driven by yesterday’s strong technical momentum into the close, solid gains in Asia and a firm opening in Europe.

Shares in Asia finished higher on Thursday, with markets in Japan and South Korea posting strong gains. The Nikkei 225 advanced 0.83 percent as banking and other financial sector stocks advanced. Automakers were also broadly higher as the yen continued to trade at the 110 handle to the dollar, suggesting the possibility of higher exports in the future due to a favorable currency exchange.

South Korean Kospi rose 0.72 percent, led by banks and steelmakers. However, gains were capped by declines in the technology sector.

U.S. stock index futures markets could get a push later today when the European markets open. They are set to open positive on Thursday, boosted by yesterday’s U.S. stock market rally and optimism over the new governments in Italy and Spain.

We’re looking for the U.S. markets to extend the rally early in the session, but we will start to turn more cautious into the close. We think we may see some profit-taking near the end of the session as investors prepare for this week-end’s G-7 meeting.