Daily Market Reports | May 01 2009
By Greg Peel
The Dow closed down 17 points or 0.2% while the S&P lost 0.1% and the Nasdaq gained 0.3%.
For the broad market S&P 500, a gain of 9.4% over the month of April represented its best performing month since March 2000. Wall Street did attempt another surge in the morning, with the Dow jumping 122 points by 11am and the S&P pushing up to 888. But by 12.30pm, both indices were back to square on the session and spent the afternoon trading in a sideways range. Sellers have appeared every time the S&P has breached the technical level of 875, and whaddya know the index closed at 872.
It was the end of the month and there is little surprise that after the best month in nine years some profits could be taken to lock in those profits and square the books with a smile. Assuming you were on the long side of course, unlike many hedge funds. There was the usual slew of earnings reports, the most notable of which was Dow component Exxon. The oil giant unsurprisingly posted its worst year in five, seeing profits fall 58% from last year. At US92c per share earnings Exxon missed the Street at US99c, but the 2.5% fall in share price was hardly catastrophic.
Coinciding with the turn at the top last night was the announcement from President Obama that Chrysler would file for Chapter 11, sending the iconic Detroit automaker into a historical bankruptcy. It’s all very contrived of course, given the government’s plan is to have a new company emerging within 60 days with the Union of Autoworkers and Fiat as major shareholders and bondholders (who otherwise rank higher then the UAW in a break-up) scoring a token minority.
Unions running a struggling business in a recession? I’d like to see that!
Sceptics suggest the 60-day plan is a pipedream given the legal attacks that will be no doubt mounted by both the bondholders and dealerships. But Chrysler would have already been bankrupt if not for government intervention and Obama’s announcement included a thinly veiled attack on Wall Street – in the form of bondholders – in support of the worker. Chrysler is not a listed company so it had no direct effect on the stock market other than perhaps to drive home the fact we are actually in a deep recession, don’t forget.
The Chrysler deal has also been considered as a necessary sacrifice in order to warn off the bondholders of the much bigger, publicly-listed General Motors. You’re next, Obama seemed to imply. But oddly enough GM shares jumped 6% in the session. This likely implies a belief GM bondholders will take the Chrysler example as a reason to shut up and settle to avoid a forced Chapter 11.
US personal income and spending data came out last night. On Wednesday it was revealed within the first quarter GDP estimate that consumer spending jumped 2.2% for the quarter. We also know that monthly consumer spending rose 0.9% in January but only 0.1% in February. Well the result for March was a fall of 0.2%.
Consumer spending has been included among Fed chairman Ben Bernanke’s “green shoots” of stabilisation. The evidence suggests, however, that January may have only been a blip related to stimulus packages and tax relief. We’re actually in a deep recession, don’t forget.
One supposedly positive sign was that weekly new jobless claims fell 14,000 to 631,000 last week, prompting calls that perhaps the rate of unemployment growth had peaked.
This is a weekly number people! Never mind that continuing claims rose 133,000 to a record 6.27m. We’re in a deep…oh you know.
The US dollar did little to trouble the scorer last night and the Aussie barely moved over 24 hours at US$0.7260. Gold closed the month with a second consecutive monthly loss, falling US$9.20 to US$888.90/oz as the safety trade again waned after such a positive stock market result. Oil added US15c to US$51.12/bbl.
A funny thing happened on the LME last night. Serial underperformer aluminium took off and added 3% in what commentators could only describe as a “speculative surge”. Aluminium has not enjoyed the equivalent spoils of recent rallies in copper and other metals, mainly because as every day goes by aluminium inventories hit new records and Chinese smelters stand ready to ramp production back up at the first sign of price improvement.
Copper had another go at the significant US$4500/t mark and again failed, closing up 1.5% to US$4440/t. Nickel added close to 3% in an otherwise mixed end of month session.
The SPI Overnight gained 18 points or 0.5%, continuing on its recent theme of constant optimism.
A positive close in the SPI is interesting nevertheless. Yesterday saw a remarkable session of trading in the ASX 200. It was so exciting you could have sold tickets.
In the blue corner stood the buyers from the “we have seen the bottom” school. In the red corner stood the sellers from the “bear market rally” school (most of who were likely inanimate and plugged into a cable connection). In the middle of the ring was the number 3779 – the January high. From the bell the buyers fought hard and quickly looked to have victory in the bag. The ASX 200 hit 3788 at lunch time and it looked as if we were truly going to break into new 2009 territory. But a quick dose of smelling salts had the sellers back on their feet, and by early afternoon it seemed all over, the index having fallen back to around 3760.
But no! The buyers weren’t spent. Another assault saw the sellers on their backs again, looking up at a score of 3799. Not only was this a solid breach but it was also close to a breach of the significant 3800 number – significant only because it has two zeros. But alas, the sellers managed one last effort, and on the final bell we closed at 3780. It was the slimmest of victories for the buyers, and not enough to be called a meaningful breach.
So a lot depends on what happens today. It is a new month, and new months will often bring in a fresh bout of optimism. But it’s also May, and you know what they say – “Sell in May and go away”.
A reminder that our esteemed editor Rudi will be presenting his dicussion of “Which Way Forward?” at the Citigate Central Hotel in Sydney on Tuesday night next at 7pm. I will be there as well to introduce Rudi and join in a Q&A afterwards. Pre-purchase tickets will be available until 5pm Monday at $18 or tickets at the door on the night are $25. I look forward to seeing you there.
