Daily Market Reports | Dec 04 2008
By Greg Peel
The Dow closed up 172 or 2%, while the S&P added 2.6% and the Nasdaq 2.9%.
An indecisive Wall Street decided to return to square at 3pm and let the last hour decide the day’s fate. For the seventh day in eight the Dow closed on an upswing. It was still a wobbly road to 3pm, with up 200 achieved at midday and almost down 200 at 2pm.
The session started weakly on the release of the ISM service sector index and the ADP jobs number. The ISM number came in at 37.3 for November following 44.4 in October. Any number under 50 signals contraction. It is the lowest reading since the series began in 1997 and the fastest monthly drop recorded. Having outsourced much of its manufacturing to the developing world, the bulk of the US economy is now services-related.
The ADP jobs number showed a loss of 250,000 jobs in the private sector in November – the biggest loss in seven years. The ADP is a privately assessed number and an unreliable indicator of the much anticipated official jobs figures due on Friday.
Well shucks – it’s not like these sorts of numbers weren’t expected. And so those who believe a bottom is now in place (a growing number) decided to buy the weakness to send the Dow into the green. But then the Fed issued its November Beige Book – its anecdotal reading of economic activity in all Fed regions. That was a shocker, of course, and for the first time in a very long time the one sector that usually provided a saving grace – mining – was also negative.
So back we went into the red, but once again the buyers fought back. Supposedly supporting the buyers was a call from the respected senior analyst at global fund manager Legg Mason that a bottom had indeed been formed. Let’s hope LM is better at picking bottoms than tops, as the fund is down 50% for the year.
While the stock market argues about bottoms (something we used to do a lot of in my day too, but usually on Friday night at the pub), the commodities markets just can’t ignore the globally weak economic data.
Ahead of the OPEC meeting on December 17, the OPEC president was reported as saying that there was “no floor” in oil prices – meaning the demand/supply equation is not going to rescue prices anytime soon. Is this bad news or good? It’s bad that OPEC should come to this conclusion, but good as it probably means a decent production cut at the meeting. OPEC supposedly has an oil price comfort zone above US$70/bbl. Undecided, the oil pit sold crude down US17c to US$46.79/bbl.
London saw another tale of woe, as aluminium, copper, nickel and tin all fell another 4% while lead sunk 8%.
Gold dipped US$6.20 to US$772.00/oz on a slightly stronger US dollar, but the Aussie gained slightly to US$0.6478.
The SPI Overnight shucked off yesterday’s indecision in the local market and added 78 points or 2%.
Yesterday’s session on the local bourse was much the same as Wall Street’s last night – positive to begin with, scared off by a weak GDP number, buyers coming back to fight it out. And local activity is little different to Wall Street in its current intensity. Apathy reigns as we enter the holiday season and war-weary traders are content to rest their numb brains at Christmas functions to take their minds off losses in their portfolios for the year. Volumes are barely registering.
Tonight sees rate decisions for both the UK and EU and expectations are that both will join the global easing push (All the way with the RBA!) and cut significantly. Supposedly positive, but not great news for commodities if the US dollar is stronger again as a result.
