[New York Close] Monster Rally Continues on New Year's Day... 3 Major Indexes Hit Record Highs

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Kim Bong-su] The U.S. New York stock market surged sharply on the 2nd (local time) as investor sentiment was boosted by China's stimulus measures and favorable economic indicators in the U.S. The 'monster rally' that repeatedly set all-time highs at the end of last year continued into the new year.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 28,868.80, up 330.36 points (1.16%) from the previous trading day. This was the largest single-day gain since December 6. The S&P 500 index also rose 27.07 points (0.84%) to close at 3,257.85, marking its biggest increase since December 12. The tech-heavy Nasdaq index gained 119.58 points (1.33%) to 9,092.19, showing its largest single-day gain since October 11 of last year. All three major indices set new all-time records.

Investors on the New York stock market were encouraged by the People's Bank of China's stimulus measures. The day before, the People's Bank decided to cut the reserve requirement ratio (RRR) for commercial banks by 0.5 percentage points. This will take effect from the 6th, potentially injecting more money into the market and providing a liquidity-driven economic stimulus effect. The People's Bank projected that the 0.5 percentage point cut in the RRR would supply liquidity worth 800 billion yuan (approximately 115 billion U.S. dollars) to the financial system.

Positive remarks from President Donald Trump regarding the U.S.-China trade conflict also acted as a tailwind. On the 31st of last month, President Trump stated, "We will sign the Phase 1 trade agreement with China at the White House on January 15," and mentioned plans to visit Beijing for Phase 2 trade negotiations.

On this day, stocks in the semiconductor sector, sensitive to trade issues, surged on the New York stock market. AMD rose 7.1%, while Taiwan Semiconductor and Micron Technology each increased by at least 3%. KLA and Intel also gained 2.5% and 1.7%, respectively. Apple, also considered a representative trade-sensitive stock, closed up 2.3% ($6.7), surpassing $300 per share for the first time ever, marking the largest gain among Dow components.

U.S. economic indicators were relatively favorable as well. The U.S. Department of Labor announced that initial jobless claims last week were 222,000, which was over 3,000 fewer than the expert forecast of 225,000.

Indicators also showed stabilization in manufacturing activity in both the U.S. and China. Information analysis firm IHS Markit reported that the final U.S. manufacturing Purchasing Managers' Index (PMI) for December was 52.4, slightly down from 52.6 in the previous month. The PMI is a monthly survey of purchasing managers in companies, where a reading above 50 indicates expansion and below 50 indicates contraction. Chris Williamson, Chief Business Economist at IHS Markit, explained, "The U.S. manufacturing sector has maintained a weak recovery since last summer," adding, "The expansion in December was influenced by an increase in new orders."

IHS Markit also reported that China's December PMI was 51.5, slightly down from 51.8 in the previous month, but still indicating ongoing expansion in economic activity.

On the other hand, Germany's December PMI fell to 43.7 from 44.1 the previous month, remaining below 50. The Wall Street Journal reported, "Manufacturing activity in Italy, Spain, and the United Kingdom contracted more sharply, and France's expansion slowed."

International oil prices rose slightly. On this day at the New York Mercantile Exchange (NYMEX), February delivery West Texas Intermediate (WTI) crude oil closed at $61.18 per barrel, up 0.2% ($0.12) from the previous trading day. At 3:31 p.m., March Brent crude futures on the London ICE Futures Exchange were trading at $66.21 per barrel, up 0.32% ($0.21).

International oil prices recorded larger intraday gains due to expectations for the imminent signing of the U.S.-China Phase 1 trade agreement and rising tensions between the U.S. and Iran, but the gains were limited by the strength of the U.S. dollar. When the dollar strengthens, prices of dollar-denominated commodities rise for investors using other currencies, which tends to limit or reduce oil price increases.

International gold prices also rose. February delivery gold on the New York Commodity Exchange closed at $1,528.10 per ounce, up 0.3% ($5.00) from the previous trading day.