Tuesday, 23 February 2016

Markets rally, US stocks look "too cheap to ignore"

Markets rallied strongly on Monday.

The S&P 500 rose 1.4 percent, the STOXX Europe 600 rose 1.7 percent, the Nikkei 225 rose 0.9 percent and the Shanghai Composite Index jumped 2.3 percent.

Oil surged after the International Energy Agency said it expects US shale-oil production to fall in 2016 and next year. US crude rose 6.2 percent.

The stock market may be rallying because of valuations.

John Stoltzfus, Oppenheimer & Co.’s chief market strategist, wrote on Monday in a report that stocks become “too cheap to ignore” once the S&P 500 falls to between 16.5 to 17 times earnings, as it did when it hit its low on 11 February. The index rebounded 6.1 percent from that low through Friday, matching the average one-month gain after six earlier instances since 2014 when it fell to that valuation.

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