Daily Market Reports | May 20 2008
By Greg Peel
The Dow closed up 41 points or 0.3%. The S&P managed only 0.1% as the Nasdaq fell 0.5%. The Dow closed at 13,028, back over 13,000 once more.
It was a euphoric start to the session as the April index of leading economic indicators was released. This indicator is used to predict economic conditions 3-6 months ahead, and had successively fallen for five months before a March reading of +0.1%. This may have been an anomaly, thought many, until the April figure also came in at +0.1%. The number provided confirmation that the US economy would not plummet and would recover in the second half. As much as such predictors are accurate.
The market took off towards the highs of the day, and the Dow reached a pinnacle of up 108. The US dollar also strengthened against all major currencies on the news. The 24-year high Aussie slipped back a bit, to US$0.9534.
However, over on the Nymex the oil price continued to rise, pressing on another US76c to US$127.05/bbl. The move came despite the stronger US dollar, and was credited to China. In the wake of its tragic earthquake, China has put in a big order to buy distillates – diesel, heating oil – and has also been forced to tap its strategic crude oil reserve.
The market had begun to become blase about the oil price, just as it now pays scant attention to ever weaker housing figures. Goldman Sachs has called oil at US$144 per barrel, yet Wall Street has been trying to break through on the upside. It was trying to do exactly that last night when, of all people, a chip-maker offered a warning. Speaking at a JP Morgan technology conference (and thus in the spotlight) the CEO of SanDisk offered a downbeat outlook for chip-makers in light of, amongst other things, the soaring price of oil.
It was if someone had just pointed out that Wall Street wasn’t wearing clothes. The Nasdaq plummeted on the speech, dragging down the other indices. The Dow was the least affected given the strength of the energy stocks therein.
Gold, which has found some renewed bullishness, ignored the US dollar and looked to the inflationary effect of the oil price as it climbed another US$2.70 to US$904.60/oz.
A rising US dollar combined with news that most base metals increased their inventories recently, sending base metals lower. After a strong Friday, aluminium fell 1%, copper 1.5% and zinc 3%. Base metals continue to be stuck in a range, with countervailing forces pulling from either side.
The SPI Overnight was down one point.
One gets the impression that if the oil price tips over, the US stock market will run. This won’t be quite so affective in the local market however, given the strong leaning towards commodities.
