Daily Market Reports | Jan 28 2009
By Greg Peel
The Dow added 58 points or 0.7% while the S&P gained 1.1% and the Nasdaq 1%.
Greetings. I hope everyone had a wonderful festive season and summer break. Personally, I spent as much time as I could avoiding anything to do with the markets and the movements thereof and as a result was able to recharge the batteries and refresh the brain cells. Well – at least the ones that weren’t lost over summer.
I have two numbers for you: 3615 and 3444. The first is the close of the ASX 200 on December 19 and the second is yesterday’s close. Dear me. I was expecting more of you people while I was away. At least the numbers aren’t as bad as they were over the same period last year, although the mood is not much brighter. But in the immortal words of Scarlett O’Hara, tomorrow is another day, and 2009 is another year. I can’t say it’s shaping up as a cracker but there are always opportunities to be had. Happy trading.
As far as the US market is concerned, we are clearly in a period of Obamarama. The mood on Wall Street is cautious and sensitive, as while even the most hard-nosed of capitalists might have begrudgingly raised a smile at the extraordinary scenes of inauguration jubilation, the reality is that a socialist administration is now in charge of an economy in tatters, and that spells danger. The other day Obama made a remark in passing that perhaps his planned stimulatory infrastructure package would be best served if the contractors involved were permitted only to use US steel, US contractors, US whatever in order to give the local economy the biggest boost possible. Wall Street is terrified this might happen. This is exactly the sort of government response that followed from the Crash of ’29 – protectionism – and that’s what helped lead the world into the Great Depression.
It is unlikely Obama’s advisors, including his respected Treasury secretary Tim Geithner, would allow such a foolish policy. In the meantime, Wall Street is waiting and debating – holding on to see just what the stimulus package may look like and just how the rest of the TARP will be deployed. Until such measures are known, it is unlikely stock markets will break out of their trading ranges. Until the economic data start to look any different, it is unlikely we will see any sort of break anyway.
Last night was a case in point. Monday featured a nice little rally on Wall Street along with positive moves in commodity prices. Last night saw a tentative continuation of the stock market rally but commodity prices tanked. Apart from commodities having had a good run for a few days, the two markets were largely reading different scripts.
There was positive news in stocks in the form of estimate-beating earnings results from both US Steel and American Express. That’s all very nice, but to pick up on a theme from before I left last year, if US stock analysts had ABSOLUTELY NO IDEA during all of 2008 why would we expect them to have ABSOLUTELY ANY IDEA during 2009? In other words, the reporting season is about spinning the chocolate wheel. There’ll be winners and there will be losers. The only comparative results that are of value are the year-on-year and quarter-on-quarter comparisons of the real numbers and a consideration of company guidance. But as many a CEO will admit, there’s a fair bit of chocolate wheel going into that last number as well. This is something to consider as we approach the half-year reporting season in Australia.
The other highlight of last night in the US was economic data. The January consumer confidence reading was the lowest ever (since 1967). This is bad news for spending (particularly with a stimulus package on the way) but probably not knock-me-down-with-a- feather stuff. Indeed, Wall Street shrugged.
What Wall Street did like was news that sales of existing homes rose – yes, rose – by 6.6% in December. Woohoo! What this implies is that finally we might be looking at a housing price rubber band that has been stretched to its limit. With house prices down as much as 30% or more in some areas due to distressed sales and bank foreclosures, there has to be some point at which those who still have a job see a great buying opportunity. The December sales managed to chip away at the record inventory overhang – not a lot, but some. Light at the end of the tunnel? Or false dawn?
Commodity markets, however, didn’t read the economic data the same way as the stock market did. Commodity markets saw low confidence as a bad thing, and also jumped over the December home sales number straight to the Case-Shiller house price index, which was down a record 18.2% for the twelve months to November and down 25% from the peak (for the 20-city sample). That’s not good, but note Case-Shiller’s was a November number and the home sales were in December. Just wishful thinking?
Commodities had had a pretty good little run anyway, so oil fell US$3.63 or 8% to US$42.10/bbl while copper and tin dropped 6%, zinc 4% and the other base metals over 2%. Gold has surged of late – without a lot of movement in the US dollar – so it dropped back US$7.00 to US$895.60/oz. The Aussie was steady at US$0.6637.
The SPI Overnight gained 43 points.
In late news after the bell, Yahoo has posted a quarterly loss due to reduced advertising demand, but as it “beat the Street” anyway the shares have shot up 4% in the after-market.
It’s good to be back.
