Daily Market Reports | May 02 2009
By Andrew Nelson
The Dow finished 44 points or better than 0.5% higher, while the S&P 500 added on 0.5% as well and the Nasdaq edged up a more subdued 0.1%.
Early on it looked like it was going to be an ugly day, but by mid-morning the Dow was back in the black and after a few more trips to either side of the line, an afternoon push made it look like we were always going to land on the upside. But once again a last hour sell off seemed to materialise and after the previous day capping off the best month in nine years, it appeared the selling in May was finally going to commence.
But in a microcosm of the day itself, the last hour of trade started with a drop, recovered, bounced a few times on both sides of the line in a tight range until the last ten minutes of the session. Then the Dow rallied 45 points to end not too far off the day’s highs. Although, at least some of the volatility can be explained by some pretty thin volumes, in part because of the May Day holiday in Europe, while UK markets will be closed Monday for a bank holiday.
All three major gauges ended higher for the week. The Dow and S&P 500 have now gained for seven of the last eight weeks. The Nasdaq has gained for eight weeks in a row. And after flirting with it a few time, the S&P has now finally managed to close above that key barrier at 875, making this recent recovery look even more tangible.
As if watching the stock gauges wasn’t interesting enough, it was oil that was really the story of the day. Crude-oil futures rose US$2.08 to settle at US$53.20 a barrel, a six-week high, boosted by growing hopes that we are finally looking at the beginning of an economic recovery. Oil also seemed to benefit from a round of short covering, or the unwinding of bearish bets, after it failed to break through overnight lows around the psychologically important US$50 level, traders told the Wall Street Journal.
The run in oil was good news for energy stocks, with the sector up 3.2% on the back of good moves form the producers. It was even a good day for US oil titan Chevron, who reported its earnings tumbled 64%, hit by the drop in oil prices. Still, the good mood in oil ensured the company’s stocks were higher on the day.
Investors also looked to economic indicators and corporate earnings reports for more clues about the economy. The responses were a little more mixed.
First, there were a few better-than-expected economic reports and these did give a boost to the broader market. The Institute for Supply Management’s manufacturing index rose to 40.1 in April from 36.3 in March beating forecasts for a rise to 38.4. While this sounds good on the surface and while the news was also well received, let’s keep in mind that any reading under 50 indicates the sector is still contracting. Yet the report still helped to feed hopes that it and other recent reads were signs that the pace of the economic slowdown is easing.
Also fuelling the fire was another report that showed consumer confidence soared in April to its highest level since the September failure of Lehman Brothers, according to the Reuters/University of Michigan final reading for April. It also marked the first year-over-year increase in the indicator since July 2007.
However, a third report showed March factory orders fell 0.9% after rising 0.7% in February. Still, it looked like investors felt that two out of three wasn’t that bad.
In earnings news, MasterCard shares fell 10% after the credit-card maker beat estimates, but said 2009 revenue will miss its target amid a drop in consumer credit-card use. Hartford Investment Group reported a US$3.77 a share first-quarter loss versus expectations of US$3.05 a share profit decline. The fourth biggest US insurer said it was closing most of its operations in Britain, Ireland and Germany as part of a pull-back from Europe. Shares were off 8% on the news.
In other news, the release of the results of the “stress tests” of the nation’s largest banks is now expected late Thursday. The results were initially expected to be released Monday and the delay has cast some doubt on a hoped for positive outcome for the banks. The date was pushed back because regulators and banks can’t seem to come to agreement and continue to debate the results. Financial stocks were broadly flat in trading on Friday.
With Chrysler filing for Chapter 11 bankruptcy protection yesterday, the auto sector remained in focus with most of the major manufacturers reporting April sales figures throughout the day. Ford, GM and Toyota all reported a more than 30% drop in sales versus a year ago, but all three reported the pace of the decline is slowing.
In currency trading, the US dollar fell versus the euro and Aussie, but gained against the yen, while gold shed US$3.90/oz to US$885/oz, still above key technical resistance at US$878/80/oz.
Base metals were a little more interesting and continued to ride the positive momentum from Wall Street. They were also pushed by the improvement in US manufacturing activity. After a fairly humdrum morning session, the complex pushed higher pretty much across the board during late Friday LME trading, with Basemetals.com reporting a gathering groundswell of covering and position-squaring on growing hope the global economy is actually taking its first baby steps on the road to recovery.
Copper was once again the star, with a 3.8% rally by the open-outcry close. Basemetals.com noted “chunkier” gains in lead and zinc, which were up 6% and 5.3% respectively. As it was the May Day holiday across Europe and Asia, while the UK has the day off Monday, much like equities markets, trading volumes were pretty thin.
Aussie investors also continued on with their optimism, seeing the SPI add 34 points to 3793 overnight.
Don’t forget! Your editor Rudi will be presenting his discussion of “Which Way Forward?” at the Citigate Central Hotel in Sydney on Tuesday night next at 7pm. FNArena’s Greg Peel will also be there 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.
