Central banks' steroids aren' t working

 

Wall Street ends flat as Draghi disappoints

U.S. stock indexes ended a volatile session little changed on Thursday after the European Central Bank reduced interest rates but ECB chief Mario Draghi confounded investors who expected multiple rate cuts by saying more were unlikely.

Stocks jumped early in the day after the ECB pushed its deposit rate deeper into negative territory and increased its asset-buying program to 80 billion euros a month from 60 billion in an effort to boost growth in the region.

" The world was really, really happy with this mainly because we' re all addicted to zero interest rates," said Kim Forrest, research analyst at Fort Pitt Capital Group in Pittsburgh. " It' s free money."

When Draghi said future cuts would happen only under extreme circumstances, investors expecting even lower rates switched their strategy to risk off, Forrest said.

U.S. jobless claims fell more than expected last week to their lowest levels since October, pointing to sustained strength in the labor market that should further dispel fears of a recession.

The U.S. Federal Reserve has said it is on track to raise interest rates gradually this year, but its decision remains data-dependent. The Fed is to meet on March 15-16.

Crude oil prices, a major driver of the market so far this year, delinked from stocks, at least for this session. Brent futures LCOc1 fell more than 2 percent after Reuters reported that a proposed meeting between major oil producers to discuss an output cut was unlikely to take place without Iran' s participation. US crude CLc1 fell 1 percent.

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Dow future up 132

 

 

 

U.S. stocks rose in low volume on Wednesday, led once more by the direction of the price of oil and energy sector shares.

 

Crude oil and US equity prices have been linked for much of 2016 to a degree that has surprised many investors. Wednesday' s market action extended that trend, with WTI crude CLc1 rising nearly 5 percent and the S & P 500 energy sector .SONY up 1.5 percent. Chevron (CVX.N) jumped 4.6 percent to $ 92.82 and gave the biggest boost to the energy sector.

U.S. crude and the S & P 500 have been directionally correlated on all but six trading days this year, according to Wunderlich data.

In a week with a thin economic data calendar, markets will turn to the European Central Bank, which is expected to further ease monetary policy on Thursday.