Daily Market Reports | Apr 17 2009
By Greg Peel
The Dow rose 95 points or 1.2% while the S&P rose 1.6% and the Nasdaq 2.7%.
The Dow closed at 8125 which marks a new high for the rally from March 6 and the highest level since February 9. The Dow failed on previous two attempts to meaningfully breach 8000. The story is similar for the more relevant S&P 500, which closed last night at 865 – up 27% from the low. Traders are now looking for a move to 900 and maybe a test of the January 6 high – the previous peak – of 934. Might that be a bridge too far?
The Nasdaq, on the other hand, is already creating new 2009 highs and has not been this high since November 5. Last night the Nasdaq shook off memories of poor Intel guidance and instead focused on the next big report from Google. Google reported after the bell, and it was good. Well actually, it was “less bad”.
Google posted its slowest quarterly profit growth since the company listed five years ago. Profit rose only 9%. Nevertheless, this was more than the Street expected, so having risen 2.5% in anticipation Google shot up another 6% in the after-market before settling back a bit. Tech continues to reign on Wall Street (or is that Times Square?) given its growth possibilities, export potential, and simple lack of debt.
And there was an enormous buzz last night when a small producer of language instruction software – the aptly named Rosetta Stone – listed on the NYSE after its IPO. The company was only looking to raise just over US$100m, and a couple of years ago would never had rated a mention. But Rosetta was front page news last night for two reasons. Firstly, because it was an IPO, and they’ve been hens’ teeth for last twelve months. But secondly, because it was the first IPO to beat its target price range in twelve months. Rosetta was targeted at US$15-17 but closed above US$25 – up 40%.
Hallelujah. All is forgiven.
There was more “less bad” in last night’s economic data. New jobless claims actually fell – yes, fell – last week by 53,000. This is fabulous news. We’ll ignore the fact that weekly jobless data are highly volatile of course, and the fact that continuing claims remain at a record high of 6.02m.
More great news came from the Philadelphia Fed manufacturing index, which rose from minus 35.0 in March to minus 24.4 for April. Economists were expecting minus 32. Zero is the neutral point, so minus 24.4 still means contraction, but the pace of contraction has slowed. Less bad.
The big profit report of the session was from JP Morgan. JPM posted US40c per share earnings compared to US67c this time last year but much better than the Street’s US32c estimate. Its shares rose 2%. Never mind that CEO Jamie Dimon noted consumer loans continue to grow “alarmingly”.
After the big hullabaloo about Goldman Sachs and its efforts to pay back its TARP funds ASAP, Dimon suggested JPM could pay back its TARP at any time without raising capital. The bank has no interest in taking any further funds, and has no interest in participating in the PPIP toxic asset sale program, which lends weight to my theory (and that of many others) that the PPIP will fail, or at the very least fizzle.
So that was the “good” news. Now back to reality – the stuff Wall Street is currently shrugging off.
After a big jump in February, housing starts fell 10.8% in March. The number of starts fell to a seasonally adjusted annual rate of 510,000 when economists were expecting 550,000. March marks the second lowest rate since the War, with last January the lowest at 488,000. Meanwhile building permits dropped 9%, and the important subset of single-family home permits dropped by 7.4% to the second lowest rate on record.
General Growth Properties – America’s second largest listed shopping mall operator – went down last night owing US$27bn.
The US dollar was strong last night, which traders put down to all this fabulously good economic and market news. Gold lost its nerve, and having held up reasonably well against signs of deflation (negative PPI, CPI) and general stock market optimism, it fell US$17.40 to US$874.50/oz. The Aussie lost 0.8 of a cent to US$0.7206.
Base metals also decided it was time for a breather, with copper falling 2%, aluminium 2.5% and lead 4% while the others were steady. While base metals had had a very solid run up to new sixth month highs in some cases and thus due for a rest, traders warn that it appears the short-covering is running out.
Oil followed the stock market lead, rising US73c to US$49.98/bbl as economic data showed obvious signs of a turnaround. The oil pit ignored China’s lowest ever GDP reading (6.1%, slightly below consensus forecasts) and ignored a 2.3% fall in February industrial production in Europe, marking an 18.4% drop year on year – the biggest fall since records began in 1990.
The SPI Overnight rose 48 points or 1.1%.
If you’re feeling keen this evening, General Electric reports before the opening bell (which rings at 11.30pm AEST). Citigroup is the biggie during the session.
