Pro-Business Investors Extend Trump Rally; Major Indexes at All-Time Highs

The “Trump” rally continued on Friday with all three major stock indexes hitting record highs. After consolidating most of the early session, the markets took off to the upside after the release of the European Central Bank’s monetary policy statement.

In the cash market, the benchmark S&P 500 Index was trading at 2247.01, up 5.66 or +0.25%. The blue chip Dow Jones Industrial Average was at 19626.05, up 76.43 or +0.39%. The NASDAQ Composite was trading 5413.22, up 19.46 or +0.36%.

The European Central Bank held interest rates steady as expected. The bank also extended its quantitative easing program until 2017. Additionally, the ECB said it would reduce purchases to 60 billion Euros per month from 80 billion Euros.

In his news conference, ECB President Mario Draghi said “uncertainty prevails everywhere,” but added the risk of deflation has largely disappeared.

Like the U.S., Draghi is keeping his options open, in case something goes wrong.

Forex

The EUR/USD retreated after the news. Late in the session, it was trading 1.0610, down 0.0140 or -1.31%. The ECB was widely expected to announce it will continue with its massive trillion-Euro bond-buying program at its meeting on Thursday. The actual decision caught many investors by surprise and they were forced to sell, driving prices sharply lower.

The December U.S. Dollar Index rose on the news. Rising equity markets helped boost the USD/JPY because of the carry trade. The NZD/USD retreated from its high on the ECB news. The Forex pair was supported early in the session after Reserve Bank of New Zealand Governor Graeme Wheeler, said the economy was in good shape and that inflation was likely to return to expected levels soon.

Gold and Crude Oil

February Comex Gold futures traded lower in response to the stronger U.S. Dollar. The futures contract was last at $1171.40, down $0.61 or -0.52%.

January West Texas Intermediate Crude Oil posted a volatile two-sided trade on Friday. Investors drove the market lower early in the session, but rebounded late to overtake the psychological $50 level. It was last trading at $50.63, up $0.86 or +1.73%. North Sea Brent crude oil posted a similar chart pattern. It was trading at $53.64, up $0.64 or +1.21%.

Traders ignored their doubts that OPEC and Russia would follow-through with their plan to curtail production and instead shifted their focus on a weekend meeting of OPEC and Non-OPEC producers that may result in an agreement to cut output further.