Daily Market Reports | Apr 01 2009
By Greg Peel
The Dow closed up 86 points or 1.1% while the S&P gained 1.3% and the Nasdaq 1.8%.
After the sharp sell-off on Monday, Wall Street looked to be gradually clawing back those losses as the day progressed, building to 3pm at which point the Dow was up over 170 points. But in came the last-hour sellers, and 86 points up was the best the Dow could manage. One cannot read much into the last couple of days trade at the end of a quarter given the amount of book-squaring, window-dressing and general posturing that goes on.
The more relevant broad market S&P 500 finished the day at 797 – just under everyone’s favourite 800 benchmark. The S&P had its best month since October 2002, rising 8.5%. But such a performance could not overcome weakness in January and February, meaning the S&P was down 11.7% for the quarter – a sixth consecutive down-quarter.
Economic data were back in the news last night as the Case-Shiller house price index for the top 20 US cities fell a record 2.8% in January. That took the twelve-month fall to 19%. Every one of the top 20 cities’ house price averages were down over 1% in January. Adding to the gloom was the Chicago purchasing managers’ index – a popular barometer of economic activity in America’s major trading centre. The index fell to 31.4% in March from 34.2% in February, reaching its lowest level since 1980.
On a brighter note, consumer confidence in the US ticked up from a record low reading of 25.3 in February to 26 in March. Economists were hoping for 28 but booked it anyway. Consumer confidence is a forward-looking indicator, and any increase in confidence goes some way to explaining why the major forward-looking indicator – the stock market – has also showed recent strength. Or is the cart leading the horse?
The US dollar fell overnight against all bar the yen, led by the weak economic data but mostly reflecting a case of not wanting to be long ahead of any G20 bombshells. Not that anyone ever expects the G20 to drop a bombshell, but better safe than sorry. The Aussie added back over a cent to US$0.6928.
Gold ticked up on the dollar’s fall, adding US$2.00 to US$918.40/oz for the month. Despite the kicker of the Fed’s move to quantitative easing during the month, gold fell 2% overall in March. It was, however, up 4% for the March quarter.
Oil closed slightly higher on the session, rising US68c to US$49.09/bbl. On a front-month futures contract basis (oil’s benchmark price), oil rose 10.9% in the month of March and 11.3% in the March quarter. The rally in oil has mostly been driven by a combination of recent stock market strength and US dollar weakness, making the rally a “look-through” trade to slightly better demand from less negative sentiment, and the inflation trade from a dollar falling further. For on the other side of the ledger, supplies of crude and gasoline in the US have only continued to rise.
Base metals closed stronger on end of month book-squaring. Copper led the way with a 5% rise while aluminium managed only 0.5% and the other metals rose 2-3%. Copper was the star of the March quarter, rising 26% mostly on Chinese restocking, while nickel was the laggard. Chinese restocking is not necessarily a bullish sign as it reflects a rebuild of inventories rather than outright demand. China has been taking advantage of low prices for inventory rebuild having run down its higher priced stocks last year. If inventory rebuilding ends but demand remains weak, China will stop buying copper and simply start running down inventories once more.
The SPI Overnight rose 26 points.
