Daily Market Reports | Mar 26 2008
By Greg Peel
The Dow closed down 16 points, which is as good as unchanged, while the S&P rose 0.2%. The Nasdaq yet again outperformed with a 0.6% rise.
So many times over the past few months have we seen Wall Street string together a couple of up-days, only to have the relief dashed by some new piece of poor data, or some other weak news or event. Well last night there was plenty around to be considered bad news, but this time a greater confidence has pervaded Wall Street and there was no familiar sell-off.
While no one expected the consumer confidence numbers for March to be good, there was still a shock in store. The Conference Board March index fell to 64.5 from 76.4 in February, while economists had expected 73.0. This was the worst reading since the 2003 invasion of Iraq. If that wasn’t bad enough, within the total index is the “expectations index” (how you see things ahead) which dropped to its lowest level since the Arab oil embargo of 1973.
It just goes to show that talk of a recession is the factor that will most likely cause one.
The other hardly surprising, yet still dire, piece of data was the Case-Shiller house price index for January, which fell 10.7% year on year. That’s the worst result since Mr Case and Mr Schiller got together in 1987.
This is the sort of stuff that could have seen the market wipe out most of its recent gains in one fell swoop only a couple of weeks ago, but the post-Bear Stearns market has a new, brighter face. As it was, the Dow did get hit to be down on the data 99 points but it was all very brief. Having quickly recovered, the market then settled into sideways mode. Sideways in this market is as good as bullish.
The market also largely took into its stride some downgrades in the financial sector. Ever since the credit crisis began, analysts from various brokerages have been playing a game of “pot calling kettle”, and some traders have become disinterestedly circumspect. JP Morgan and UBS cut earnings forecasts for Merrill Lynch, suggesting more write-downs will be forthcoming, while Merrills in turn downgraded Bank of America and a couple of other regional banks. Merrills analysts no longer have a single Buy rating in the financial sector. (A cynic would say that’s a perfect Buy signal).
The fact is that write-down talk was big news late last year but is now simply expected. The financial sector entered 2008 with fourth quarter write-downs and suggested more write-downs will follow for the first and maybe even second quarters. So this is old news.
One bright piece of news was an earnings guidance upgrade from agricultural biotech and Dow component Monsanto. Love ’em or hate ’em, Monsanto represents that element of the US stock market in which many are placing great faith – those companies which derive more than 50% of revenues from outside the US. Monsanto shares jumped 10%, and it is notable that another sector with large offshore earnings – tech – has been outperforming even the stronger broad market these past few days.
The Monsanto news was also a bit of a fillip for hard-hit commodity prices in general. Wheat, for example, jumped 4.6%. But given the weak consumer and housing numbers, it was back to business as usual for the US dollar, which fell against all major currencies. This meant a green light for traders to jump back in and buy every commodity that was trashed last week.
Base metals took off in London, posting big gains to the official close mid-session before settling back a bit in the afternoon. By day’s end, rallies of 2-3% had been posted across the spectrum.
Oil wrestled with falling consumer confidence and a lower dollar to manage a US36c rise to US$101.22/bbl.
Shattered gold had a big turnaround, rising US$23.80 to US$939.00/oz, while even more shattered silver topped that reverse to gain 5.5% to US$17.91/oz.
The Aussie gained close to US1c to US$0.9162.
After the big gain posted on the Australian bourse yesterday, the SPI Overnight added only another cautious 12 points last night. There’s little to suggest today won’t be another up-day, particularly in the materials sector, but boy – we’d hate to see the market get too cocky.
