Daily Market Reports | Oct 04 2008
By Greg Peel
The Dow fell 157 points or 1.5% while the S&P fell 1.4% and the Nasdaq 1.5%. The Dow fell over 7% for the week and the S&P 500 10%.
The bill was passed in the House, as expected.
At the end of the most tumultuous week on Wall Street anyone can remember, it’s a case of what happens now? The Dow rallied over 300 points from the open to the point at which President Bush wasted no time in signing the rescue package into law, but the sellers moved in once again. The bill will prevent the global financial market from suddenly collapsing, but it will not turn the global economy on a dime.
The Dow was able to rally early when the monthly jobs report was released. The number of unemployed in the US rose 159,000 in September against an expectation of 100,000, but the actual unemployment rate stayed steady at 6.1%. The latter figure was heartening for a market braced for something possibly very much worse.
Credit markets did not suddenly free up on the news of the bill being passed, and the three month US Treasury bill was again bought, sending its yield to 0.5%. Inflation is running at around 5%, so investors are happy to lose 4.5% in real terms (pa) just to park their wealth somewhere considered to be safe. The credit markets were never going to just return to normal on the passage of the bill. It’s actual passage is only Step One. Step Two is find out exactly how the bill’s intentions will be specifically implemented, and Step Three is to see whether or not it actually works. Credit markets will remain extremely timid and the process will take some time.
Beyond the stock and credit markets it was eerily quiet. The US dollar moved little, allowing commodity prices to have a rare day where they didn’t fly around several per cent. If ever there was a case of TGIF in global financial markets, this was it.
Oil fell US9c to US$93.88/bbl, gold fell US30c to US$834.80/oz, base metals were mostly 1-2% stronger after a solid week of falls. The Aussie ticked up slightly to US$0.7740.
The SPI Overnight fell 48 points.
Monday begins a new week in a new world.
Just to clarify, there will be no FNArena news service on Monday as it is a long weekend in NSW. The ASX is open but trading will be extremely light and brokers will be operating on skeleton staff only. There will be no morning broker reports and thus no Broker Call. The FNArena website will operate as usual with index price updates. There will be another Overnight Report on Tuesday morning which, due to the move to summer time in NSW, will be up to one hour later in local time than it has been over the winter months.
Have a good weekend.
