Daily Market Reports | May 24 2008
By Greg Peel
The Dow fell 145 points or 1.2% on Friday in a quiet, pre-long weekend session. The S&P fell 1.3% and the Nasdaq fell 0.8%.
Once again the oil price finds its way to the top of this report, as oil is currently the primary focus across the globe. After a bit of a slip on Thursday, oil rebounded US$1.38 to US$132.19/bbl on Friday, driven mostly by a weather report. Natural gas climbed to an all-time high. The US National Oceanic and Atmospheric Association announced it expected the Atlantic hurricane season, which begins officially in June, would this year be “near average” or “above normal”. That’s all we need.
At the same time the global push to review subsidies in the emerging world is gaining strength. Indonesia, Malaysia, Taiwan and India are all now looking at either reducing or eventually scrapping their subsidies on domestic energy prices. That represents an awful lot of people.
But in a day that was all about squaring up and getting out of town as quickly as possible the overriding spectre of a high oil price was enough to promote more weakness in stocks. Add to that the a report from the US National Association of Realtors noting that the inventory of unsold homes jumped by a huge 10.5% in April and you have little reason to be bullish. At 4.55 million, the NAR suggests inventory levels are now “uncomfortably high”.
Suddenly the housing slump is back in the frame. So often were weak data emerging in new home sales, existing home sales, and home construction in recent months that Wall Street had begun to get bored with them. Okay – housing is weak, but we’re bullish right now and we don’t care. But as the stock market has tipped over at the 200-day moving average mark, and shows all signs of heading back towards, if not all the way to, previous lows, then the market is no longer so bullish and the housing slump is every reason not to be.
Either way, one can’t read too much into a pre-holiday Friday and it will be safer to gauge the mood of the market come Tuesday.
The US dollar fell slightly again on the housing news, sending gold up by US$3.30 to US$924.20/oz, while the Aussie turned around again to add US0.4c and sit right on the US$0.9600 mark.
London will also be closed on Monday so for base metals it was a time to consolidate, meaning the sharp sell-off on Thursday was reversed to some extent on the weaker US dollar. Copper and aluminium bounced back 1.5% and 1% respectively while zinc jumped back 3% and nickel 4%. Lead continued its renewed unpopularity however, falling another 1%.
The SPI Overnight was down 65 points. This suggests the ASX 200 might take another look at 5700 on Monday, a level that more than once proved to be a resistance level back in February. However, with the long weekend overseas there may not be a lot of action.
An Overnight Report will be published on Tuesday, but it may be somewhat brief.
