Daily Market Reports | Sep 05 2009
By Andrew Nelson
The Dow finished 99 points or 1% higher, while the S&P 500 advanced 1.3% and the Nasdaq gained 1.8%.
Today was always going to be about the latest jobless report and while it was far from perfect, investors made their minds up early to focus on the bright side. The report showed smaller-than-expected job cuts in August, but the unemployment rate also hit a 26-year high. Volumes were thin ahead of the Labor Day weekend and traders seemed more than happy to pick up and run with what was, if not good news, at least better than it could have been.
The day’s run still wasn’t enough to keep all three indexes from ending the week lower after stocks tumbled in the first three sessions of the week. For the week, the Dow was down 1.1%, the S&P 500 gave up 1.2% and the Nasdaq was 0.5% lower, with shorting in stocks beginning to pick up pace as traders start to hedge against a possible pull-back that many predict is coming.
Volumes are set to pick back up from their sluggish summer holiday levels on Tuesday, after the end of the long weekend (which traditionally marks the end of summer). The Street is back to full time status next week and the sustainability of the summer’s light volume rally will begin to be tested.
Taking a closer look at the jobs data shows that the US Labor Department reported 216,000 less jobs in August, the smallest number of job cuts since August 2008 and a slightly better read than expected. However, and what seemed to be shoved aside, is news that the revised data that came along with the report showed more job losses than previously reported in earlier months, while the overall unemployment rate grew to 9.7%, its highest level since the beginning of the Reagan administration.
There was also a bit of good news that came out of the International Monetary Fund, which boosted its forecast for 2009 and 2010 world GDP. The IMF now expects world GDP to contract a little less than previously expected in 2009. The forecast is for down 1.3% versus the prior forecast of down 1.4%. On top of that, the IMF also expects world GDP will expand 2.9% in 2010, up from its prior growth estimate of 2.5%.
With Wall Street closed on Monday, focus will shift across the Atlantic to London where the G20 finance ministers meeting, which kicked off today, will continue.
Tech stocks were strong, helped by comments from Intel’s CEO, who said a combination of ageing personal computers and Windows 7 will likely prompt companies to start spending money on PCs again next year. The remarks served to support the wider belief that company IT spending will pick up next year.
The comments saw the tech laden Nasdaq outperforming both the Dow and S&P, while sector heavyweights Microsoft and Cisco were among the best performers on the Dow.
Apple was also on the run ahead of its media event next week, where it is expected to introduce new iPod models. The market also wondering if Steve Jobs, who is now back at work after a six-month medical leave, will make an appearance.
Fannie Mae and Freddie Mac remained on the warpath, with shares in both agencies jumping . The two US government-sponsored entities were among the most heavily traded issues on the New York Stock Exchange this week and have now regained the minimum list price required to trade on the Big Board. Passing the milestone just sent the stocks up even more.
The US dollar lost steam against major counterparts in choppy trade Friday, falling almost 1.5c against the Aussie, while also losing ground against the euro and the Japanese yen as investors fled the safety of its embrace on the seemingly positive jobless read. Treasury prices suffered a similar fate, with the price dropping and the yield on the benchmark 10-year note rising to 3.44% from 3.34% late Thursday. Treasury prices and yields move in opposite directions.
Crude oil for October delivery arrested its recent slide, rising US6 cents to settle at US$68.02 a barrel on the New York Mercantile Exchange. Oil prices have been slipping since hitting a 10-month high just below US$75 a barrel late last month. Despite the slight up-tick, a number of truckers, airlines and rail road shares rose, taking heart in oil prices coming back off that10-month highs set last week. Fuel prices are directly linked to the profitability of transportation companies.
Gold pulled back a little bit after the best two-day rally since March, which saw futures contracts fall just US50c shy of the US$1,000 mark. Gold hasn’t closed above the psychologically significant $1,000 since February 20. Gold slipped $0.90 to settle at $992.50 an ounce, but is still sitting within a cooee of a grand.
Base metals were mixed on the LME, with only lead and zinc posting any significant positive moves as volumes in both ran hot on a zinc lead switch, with investors trading the arbitrage offered by a difference in price of US$400 and higher. Basementals.com reports that producers have also been caught short by the 15% run in lead, while speculators are predicting that zinc might be the next one off the bat.
Elsewhere in the complex, Copper clung on to most of the gains it has cemented since the soft levels seen at the start of the week, while both aluminium and tin also slipped a little and nickel closed down 3%.
Global markets were also on the mend, with major European markets up at least 1% and most Asian markets ending higher yesterday (the Nikkei excluded).
Australian investors seemingly liked the push on Wall Street, with the SPI adding 38 points to 4465 overnight.
