Daily Market Reports | Nov 18 2008
By Greg Peel
The Dow fell 223 points or 2.6% while the S&P fell 2.6% and the Nasdaq 2.3%.
The Dow quickly fell 250 points from the open last night as weak economic data continue to pour in. In the Asian session yesterday Japan announced what everyone had feared. Economists had pencilled in a 0.1% increase in GDP in the third quarter but the result came in at minus 0.1%. The second quarter result was a 0.9% contraction, making the annualised GDP figure a 0.4% contraction and officially placing Japan in recession for the first time since 2001.
Following on from Japan, the US National Association for Business Economics announced it expected a 2.6% contraction in the US economy in the fourth quarter following on from 0.3% contraction in the third, also placing the US in recession. A survey by Dow Jones found 96% of economists believed a recession had already begun. Well duh. The NABE nevertheless suggested economic weakness would likely last into 2009, which is again no great shock but still not encouraging news.
The New York Fed announced manufacturing activity in the state contracted in October, sending the Empire index to a record low of negative 25.4.
There was some good news in the form of October industrial production, which rose 1.3% compared to a 0.5% expectation. However September had been a shocker – the worst result in 59 years – and the initial figure of a 2.8% fall was last night revised to a 3.7% fall. Given September was the hurricane month the figures need to be put in context, but the production increase in October provided little solace.
Citigroup announced it would cut up to 53,000 jobs.
As policymakers argue over the fate of General Motors, the automaker announced it would sell its 3% stake in Japan’s Suzuki back to the company for US$232m, representing the current trading price on the Tokyo bourse. This gave GM shares a rare boost.
But despite depressing news, Wall Street bargain hunters moved in mid-morning and by lunch time the Dow was into the green. The move was fleeting however, and the afternoon saw a dreary drift into negative territory once more. Volume was almost non-existent. And so once again the market decided to square just before the bell and there was no one to play with. The Dow fell about 100 points in the last minutes of trade.
It is hard to see any particular impetus for a rally at present, other than Wall Street just one day deciding enough is enough. There is not going to be any positive economic news. No company is going to put out glowing guidance. The US government is in lame duck status and thus unwilling to do anything significant and the president-elect will make no sweeping policy announcements until January when he takes the reins. Volume will likely remain light as Wall Street looks forward to a Christmas of lay-offs and zero bonuses. As November unfolds, it appears the Grinch might steal the Christmas rally.
The US dollar was generally weaker against major currencies but for the yen last night, but commodity prices did not respond in kind. Options expiry on the Nymex ensured oil trading was volatile, with crude ultimately closing down US$2.09 to US$54.95/bbl – its January 2007 level. Gold drifted off US$5.30 to US$740.30/oz.
Base metal prices continued to weaken as inventory numbers build up in the face of global recession. Aluminium, copper, nickel and zinc all fell 2-4%.
The SPI Overnight fell 99 points.
