Daily Market Reports | Dec 05 2008
By Greg Peel
The Dow fell 215 points or 2.5% while the S&P fell 2.9% and the Nasdaq 3.1%.
It was mostly a rare nothing-day for all bar the last hour of the session as the Dow bounced around the flatline, fell 100, and recovered again up to the 3pm mark. It has often been suggested by critics of the game of basketball that consistent scorelines of, for example, 110-100, suggest the game should be reduced only to the last five minutes to spare the superfluous time beforehand. As I have previously suggested, Wall Street might do well to consider the same policy.
For Wall Street, last night was all about jobs. Tonight sees the release of the official November employment figures and obviously the Street is braced for the worst. Lead-up data have already been relatively stark prompting pre-emptive nervousness.
The weekly jobless claims number unexpectedly dropped 21,000 but the running monthly average of new claims remained above historic levels of 500,000. More ominously, a rash of retrenchments was announced by global giants such as DuPont, AT&T and Nokia for a total of thousands of jobs. Auto-workers carrying hopeful placards crammed in to the Senate hearings in Washington where the Big Three CEOs are prostrating themselves on the floor but so far finding little sympathy. November sales figures were released by several large chains and they were as bad or worse than the terrible October numbers – and we’re talking Christmas. Extraneous staff is always the first cost to be cut in the retail game.
Yet despite all this doom and gloom, Wall Street failed to post much of a reaction until the arrival of the three o’clock wave. Again we are forced to consider that stock markets have been sold down all year on the threat of recession, talk of recession is self-fulfilling, and now the numbers are showing exactly that. Should the reaction thus be: “Omigod it’s a recession, sell, sell sell!”?
Perhaps the fact the Dow reached as low as 325 points down just after 3.30pm but this time did not go on with it is an answer. But as we move towards the end of another quarter, the threat of another round of redemptions looms large.
Across the pond last night, Europe was responding to its own, possibly more dire economic problems. It was rate cut night and the rush was on.
The European Central Bank led off with its biggest interest rate cut in its short history, cutting 75 basis points from 3.25% to 2.50%. Following on from its historic 1.5% cut last month, the Bank of England slashed another 100 points from 3% to 2% to reach its lowest rate since 1951. Both were outdone by a suddenly concerned Swedish central bank which won the night with a full 175 point cut from 3.75% to 2.00%. Not wishing to miss out in all the fun, yesterday New Zealand also cut a solid 150 points off its rate from 6.50% to 5.00%.
While historically significant, the cuts still did little to surprise European stock markets which still finished lower on the day. It’s all part of the globally coordinated stimulus drive, both monetary and fiscal. Last night France announced a $50bn stimulus package that makes the Australian Opposition’s attack on deficits seem somewhat trite. (Last night a Coalition revolt in parliament hopefully proved to the Opposition leader that an adversarial system does not imply an obligation that black must always be called white for political gain.)
Such rate cuts across the globe but not (yet) in the US should have sent the US dollar skyward, but in fact the response was mixed. Nevertheless, commodity prices acted as if the US dollar had leapt, and fell once more.
Oil demand figures released last night showed a continuing fall in demand for even gasoline despite gas at the pump in the US now being under US$1 from a peak over US$4. Oil fell US$3.31 to US$43.38/bbl.
Gold fell US$8.70 to US$763.30/oz. The Aussie slipped back to US$0.6418.
Base metals put in another dreary performance, with aluminium and copper both falling over 3%.
The SPI Overnight fell 36 points.
