Daily Market Reports | Dec 09 2008
By Greg Peel
The Dow closed up 298 points or 3.5% while the S&P added 3.8% and the Nasdaq 4.1%.
It was a rare day of relatively low volatility, given the Dow opened higher, hung around until 2pm when it decided to kick, and then closed short of its highs on late profit-taking. It was a session from days gone by, albeit still with rather large numbers involved.
There is a fresh air of confidence on Wall Street at present that began with Friday’s dismal jobs number. Wall Street provided a “buy the fact” response and in so doing removed a deal of fear that another test of the lows was on the cards. Could this be it? The buyers moved in again last night, but they had some impetus.
Barack Obama announced his intention to pour money into infrastructure spending in a big way, harping back to the days of the great US highway construction bonanza. This is not just a case of digging holes and refilling them, or white-washing rocks, for the purpose of providing jobs. America’s public infrastructure is in a state of disrepair following decades of complacent negligence. It will be money well spent, even if that money is being created out of thin air.
Hello? Nathan Rees? Hello?
The other positive announcement was a US$15bn package to prop up the otherwise deceased US auto industry, which the Senate committee believes is palatable for Congress if not entirely favoured in its restraint by the outgoing administration. The Big Three wanted US$34bn, but Wall Street saw the merit in forcing the auto industry to change its go-fast stripes.
So the news was generally positive and enough to encourage a second day of stock market surge. The infrastructure and auto packages were also good news for commodities as they are seen as a counter to evaporated private sector demand. Throw in the fact that a bit of renewed risk appetite meant a withdrawal from the safety of the US dollar, and the scene was set for some decent commodity price correction.
Oil leapt 7.5% or US$3.09 to US$43.90/bbl, with additional impetus from expectation of a big production cut at the upcoming OPEC meeting. Gold shot up US$16.80 to US$772.10/oz, and the Aussie added two cents to US$0.6669 from Friday.
Base metals prices were in general comfortably stronger in London, but copper decided to explode to the upside with a 7.5% rise.
The SPI Overnight added 97 points.
The infrastructure package was clearly blessed relief for the beaten down materials sector last night, highlighted by aluminium giant Alcoa putting in a 19% gain. This should be good news today for the owners of Alcan. It looks like Santa might finally be gearing up for that elusive rally and sending the elves in with buy orders.
Be warned, however, that this can just as easily turn around again and have another 700 point crash like last week. That is the nature of bear market rallies. Last night the Dow traded briefly over the 9000 mark before day-traders decided that was enough for one day, which seems a long way from the intraday low of 7400. But put a couple of weak days together and we can be back there fast. That is not to put a dampener on things, for a typical bottom-forming pattern is underway. If subsequent lows remain higher then previous lows, we may yet be in for a decent retracement. Just be careful of tallying poultry.
