Record Closes in Sight as 'Easy Money' Keeps Stocks in the Green

NEW YORK (TheStreet) -- Stock markets were eyeing even more record closes on Friday afternoon, even though some of the earlier momentum had abated. Benchmark indices remained in the green, though some of the day's enthusiasm cooled after Europe and China took decisive monetary easing action earlier Friday.

The S&P 500 climbed 0.46% to 2,062.16, around 10 points lower than its all-time high set right after market open earlier. The Dow Jones industrial Average added 0.47% and the Nasdaq gained 0.26%. Even if stocks fall further, any gain will net the S&P and Dow new record closing highs after lifting the bar again on Thursday.

"Easier money responds well," Croft Funds' portfolio manager Kent Croft told TheStreet. "Europe and China are the two biggest worries, given the size of their economies, and have been for some time so any incremental good news coming out of those countries is very positive for the markets."

The European Central Bank announced it had started buying asset-backed securities in a move to ease monetary policy and resuscitate growth in the eurozone. European markets rocketed higher, with Germany's DAX up 2.6%, as the ECB made its announcement.

Markets were already on a tear after ECB President Mario Draghi talked of monetary easing policies in a speech. Addressing a banking conference in Frankfurt, Draghi said the eurozone's inflation was proving challenging and that the ECB was prepared to do "what we must to raise inflation and inflation expectations as fast as possible."

The eurozone has been a lingering threat to global economic strength as troubled pockets of the region teeter on the cusp of deflation, most recently seen in the weakening growth in its largest economy Germany.

"The next steps are likely sovereign bond buying, and it looks as though, barring an unexpected turn around in the data, the ECB will take that tack within the first few months of 2015 (if not in December)," said BMO Capital Markets' Benjamin Reitzes in a research note. "The question is when will Draghi be able to get enough of the governing council on board to start buying government debt?"

Boosting Asian markets, China cut its interest rates by 25 basis points, its first rate cut in two years, as a solution to stalled growth in the world's second-largest economy. The Shanghai Composite closed 1.4% higher.

Heavy machinery and construction company Caterpillar (CAT) spiked 3.8% on news of China's stimulus measures. The company gleans 20% of total revenue from the Asia/Pacific region. Joy Global (JOY) , which manufactures mining equipment, popped 2.4%.

Prior to Friday, investors had attempted to ignore worrying data out this week from the two troubled regions, training a laser focus on a resilient domestic economy to ease those concerns. On Thursday, for example, China's latest manufacturing PMI fell to a six-month low, while eurozone PMI fell to a 16-month low.

"The U.S., despite the fact that we can't seem to get out of this 2% GDP range, is certainly on firmer footing or the strongest bet on an international basis," said Sterne Agee's chief economist Lindsey Piegza in a call.

Brazilian stocks were gaining in anticipation that former banking executive Joaquim Levy will be named the country's finance minister and herald the beginning of market-friendly initiatives for the nation. President Dilma Rousseff's pick will be named later Friday. Steelmaker Vale (VALE) surged 9.5% while oiler Petrobras (PBR) spiked 11.8%.

GameStop (GME) was plunging 13% after the games retail chain reported a 2.3% drop in comparable-store sales, due to the delayed launch of popular game "Assassins Creed Unity."

Software companies Splunk (SPLK) and Autodesk (ADSK) were popping 3.8% and 6.8%, respectively, after posting better-than-expected third-quarter results.

As for next week, though shortened due to Thanksgiving, it will be a busy one. The economic calendar includes GDP numbers, consumer confidence figures, personal income and spending reports, and durable goods. 

"The stars are aligning for a surge in consumer confidence plunging gasoline prices, lower unemployment, and the rebound in stocks," said Credit Suisse analysts in a report. The firm forecasts a minor downgrade to third-quarter GDP growth to 3.4% from 3.5% and fourth-quarter GDP of 2.5%. 

Piegza, and firm Sterne Agee, were slightly less optimistic for the year-ending quarter. 

"We're looking for around 1.5% in the final quarter of the year," she said. "We are looking for a sizeable fall-off at the end of the year as Christmas sales are likely to come in very disappointing."

-- Written by Keris Alison Lahiff in New York.

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