Debt Ceilings and Higher Stock Prices

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Moody’s voiced concerns about the fiscal state of things here in the U.S. They said they may cut our debt rating if a deal can’t be reached to lower the country’s debt to GDP ratio. In a tough market that would have sent stocks lower. But, stocks were bought on the news of Moody’s concerns because it prompted people to think that the Fed is now more likely to announce more quantitative easing on Thursday. 

Stocks have been boosted by the sharp selloff in the dollar. The dollar was sold in light of the announcement from Moody’s. The Dow finished 69 points higher but was up over 100 points at its high. The Dow was up 0.52% and the S&P 500 climbed 0.31% and the NASDAQ was up just 0.02% as Apple traded off all day. 

Financial stocks continue to trade higher. Insurance companies and banks saw consistent buying throughout the day. Bank of America continues to trade higher on heavy volume. The stock closed up 5.48% on the day and is up 13.1% for the month. Morgan Stanley reacted favorably to its announcement they will purchase the remainder of its Morgan Stanley Smith Barney stock form Citigroup.

Energy stocks had a good day. Natural gas stocks were in favor on news that the recent hurricane may have brought the supply and demand equation into better balance. Refiners continue to be an area of particular strength. Integrated oils, drillers, service companies and E&P stocks are all working higher today.

The consumer sector of the market was an area of weakness. Luxury and high-end retailers were very weak today. Some of the luxury retailers reported that sales in China were disappointing. This news put the entire space under pressure. 

The NASDAQ trailed the S&P 500 significantly today. Apple, the largest name in the NASDAQ was off slightly and was a drag for the index. Apple is expected to formally announce the launch of the next iPhone. Around these launch dates the stock tends to be volatile as the bulls and bears debate if the stock can continue to work higher. 

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About Thomas J Smith CFA