Japanese Stimulus Leads To Initial Strength On Wall Street - U.S. Commentary

(RTTNews) - Stocks moved sharply higher at the start of trading on Friday, extending the strong upward trend seen over the past two weeks. The major averages climbed firmly into positive territory, with the Dow reaching a new record intraday high.

Currently, the major averages are off their highs for the young session but are holding on to strong gains. The Dow is up 133.70 points or 0.8 percent at 17,329.12, the Nasdaq is up 53.60 points or 1.2 percent at 4,619.74 and the S&P 500 is up 15.20 points or 0.8 percent at 2,009.85.

The initial strength on Wall Street was largely in reaction to news of further monetary policy easing by the Bank of Japan.

By a 5-4 vote, the Bank of Japan's Monetary Policy Board unexpectedly decided to raise the monetary base at an annual pace of about 80 trillion yen. The bank previously targeted an increase of about 60 to 70 trillion yen.

"So much for the end of QE," said Julian Jessop, Chief Global Economist at Capital Economics. "The Bank of Japan's announcement today that it is stepping up its asset purchases is a timely reminder that not everyone has to follow the Fed."

"We would be wary of speculation that an outflow of Japanese money will lift bond markets elsewhere," he added. "Nonetheless, further QE in Japan should help to support equity prices worldwide and especially in the euro-zone if expectations build that the ECB will follow with full-blown QE of its own."

The news out of Japan has overshadowed a Commerce Department report showing an unexpected drop in U.S. personal spending in the month of September.

The report said personal spending dipped by 0.2 percent in September after climbing by 0.5 percent in August. The modest decrease came as a surprise to economists, who had expected spending to inch up by 0.1 percent.

Additionally, the Commerce Department said personal income edged up by 0.2 percent in September compared to estimates for a 0.3 percent increase.

A separate report from MNI Indicators showed a faster rate of growth in Chicago-area business activity in October, while Reuters and the University of Michigan upwardly revised their reading on consumer sentiment for the month. Semiconductor stocks have shown a substantial move to the upside in early trading, driving the Philadelphia Semiconductor Index up by 3.8 percent. Microchip Technology (MCHP) is posting a notable gain after reporting second quarter earnings that matched analyst estimates.

Brokerage, internet, biotechnology, and electronic storage stocks are also seeing considerable strength, moving higher along with most of the other major sectors.

However, gold stocks are bucking the uptrend amid a sharp drop by the price of the precious metal. With gold for December delivery plunging $31.80 to $1,166.80 an ounce, the NYSE Arca Gold Bugs Index has tumbled by 4 percent.

In overseas trading, stocks markets across the Asia-Pacific region saw considerable strength on Friday following the Bank of Japan news. Japan's Nikkei 225 Index soared by 4.8 percent, while Hong Kong's Hang Seng Index jumped by 1.3 percent.

The major European markets have also shown notable moves to the upside on the day. While the U.K.'s FTSE 100 Index has advanced by 0.9 percent, the German DAX Index and the French CAC 40 Index are up by 2 percent and 2.1 percent, respectively.

In the bond market, treasuries have moved back to the downside after ending the previous session modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.3 basis points at 2.328 percent.