European Central Bank president Mario Draghi didn't disappoint the market today, unveiling the unlimited bond buying program called Outright Monetary Transactions. Major U.S. indices are surging about 2 percent on the news. Rumors of the plan leaked out yesterday, helping stocks to a modest rally. The central bank also held interest rates at their current levels.
The move provides a backstop in essence for many of Europe's most troubled economies. The bond markets on Spain and Italy have been "distorted," according to Draghi, with yields rising in recent months as concern of the financial crisis intensified.
Based on the market's reaction, Draghi--who has increasingly been positioning himself at the forefront of the crisis--has seemed to deliver on his promises to do "whatever it takes" to preserve the euro.
Investors, many of whom having been on the sidelines in recent months, have accepted the news as reason enough to move back into stocks, pushing mostly the safer blue chip names up in the rally. Microsoft (MSFT), General Electric (GE), and Chevron (CVX) are among the mega cap leaders gaining today.
The U.S. economy also received a nice serving of good news as well. Private sector jobs grew by 201,000 in August, marking the largest increase in five months and topping expectations. The U.S. Labor Department also announced that jobless claims fell 12,000 to 365,000.
The government reported that applications for state unemployment benefits fell 12,000 to 365,000 last week. Economists were expecting a slight decline of 1,000. According to the Institute for Supply Management, the services sector also grew ahead of expectations in August as well.
The question now is whether or not these strong economic reports will impact the Federal Reserve's decision to move forward now with additional stimulus at next week's FOMC meeting.