FYI | Oct 23 2007
By Greg Peel
The rock’n’roll days experienced during the height of the credit crunch were back again last night. The Dow twice tried to post triple-digit falls, before rebounding, falling, and rebounding again. A final flurry of buying took the index 45 points, or 0.3%, into the black. The S&P ultimately gained 0.4% while the Nasdaq – a centre of close attention last night – added 1%.
Initial weakness was largely as a follow-through from Friday’s fall as the bears asserted their recession-fear stance. But the bottom-fishers were about, and trading became very stock specific. On the NYSE advancers only led decliners by 9 to 7 on not extensive volume. Much of the positive sentiment once again surrounded the tech sector, particularly in anticipation of the upcoming after-market Apple result. Hard hit financials and builders were, however, also sought.
And Apple did not disappoint. Indeed, the tech leader blew away analyst forecasts in posting a 67% increase in third quarter profits. Sales of the iPhone, iPod and Mac all either met or exceeded expectations. Apple’s 8% jump in the after-market should set the scene for the broad index tonight.
In markets elsewhere it was a case of who was leading who. After falling sharply on Friday, the US dollar rebounded strongly against all currencies, spurred on by the turnaround in the stock market. There were clearly many fearing a significant stock market fall. This set off profit taking in all commodities, from oil to gold, base metals and grains.
Oil fell US$1.04 to US$87.56/bbl as the November delivery contract reached expiry. Gold was always poised for some profit-taking as well, and it fell US$9.70 to US$753.90/oz.
Base metals took a big hit in London. Aluminium fell 1.4%, copper 2.3%, lead 6.45, nickel 3.7%, tin 1.4% and zinc 5%.
The SPI Overnight gained 47 points.
The sentiment on Wall Street at present is not one of a return to euphoria. Traders are still concerned about further profit releases, while also pointing to the safety net of the “Bernanke put”. The yen is also being closely watched, which again brings us back to who is leading who. A rising yen means potential carry trade unwinding – and thus risk aversion – and is bad for stock market sentiment. The yen fell last night as the dollar rallied, supposedly as a response to the stock market’s rebound.
The Aussie slipped a further half-cent or so last night to reach US$0.8862.
