Daily Market Reports | Sep 12 2009
By Andrew Nelson
On the eighth anniversary of the September 11, 2001 terror attacks, the Dow ended down 22 points or 0.23%, while the S&P 500 closed 0.14% lower and the Nasdaq slid 0.15%.
Stocks slipped on Wall Street, snapping a five-day winning streak and pulling the major gauges down from their previous 2009 highs. Falling oil prices put the pinch on the big energy stocks, while commodities stocks and their underlying products were also weaker as investors looked to book some profits.
The Dow rose 1.7% on the week, and is up 9.5% for the year to date. The S&P 500 was up by 2.6% this week and the Nasdaq rose 3.1% on the week. All three have risen in three of the last four weeks and seven of the last nine.
Stocks did manage to post some slim gains up to around midday on the back of FedEx’s upbeat profit forecast and a jump in consumer sentiment, but the gains were shaky. As shares began to slip, gold advanced, hitting a seven-month high above US$1,006 an ounce as investors started to look in earnest for a hedge against the US dollar’s slide. The move marked gold’s fourth straight week of gains.
Conversely, the US dollar fell for a fourth session, with the euro rising to US$1.4634 earlier in the session, its highest level since last September. The Aussie and yen were also stronger, sitting at or close to multi-month highs against the greenback. All up, the dollar index lost 0.2%.
One could have assumed this trend would have been a positive across the entire commodities space given dollar-traded commodity prices have been rising of late on the weak greenback on bets of a global economic recovery. But this just wasn’t the case today.
Crude prices started to slip as soon as stocks lost momentum mid-morning. October crude futures fell US$2.65, or 3.7%, to US$69.29 after hitting a two-week high earlier in the day of $72.90/bbl. It was the first session in five that oil retreated. News from China that industrial output rose 12.3% on the year in August failed to provide support.
However, there was other news from China, news that showed crude imports by the world’s second largest user of oil had dropped from July’s record high.
Not helping matters was yesterday’s report for the US government’s Energy Information Administration, which said demand for gasoline and other petroleum products fell last week, resulting in a big build-up in fuel inventories. Gasoline demand actually fell 2.1% from the prior week.
Elsewhere in commodities, base metals were choppy at best, with most contracts ending lower. Although there were periods in the day where prices moved up, they lacked the sustainability that has been seen in the preceding weeks.
News from FedEx did help stocks off to a positive start after the package delivery firm, which is often seen as a proxy for the economy, lifted its fiscal first and second-quarter earnings forecasts due to cost cutting and stronger international shipments. The company upgraded its 1Q EPS forecasts to US58c versus its earlier forecast for a profit of US44c and now expects to earn between US65c to US95c per share in the second quarter versus its earlier prediction of US70c. Shares shot up more than 5%.
Financials were also back in the spotlight after Treasury Secretary Timothy Geithner said the US government is keen to get rid of its stakes in financial institutions, but will be careful to not do so too soon.
Transportation stocks, which many expect will be among the first to benefit as the economy recovers, were also stronger. The Dow Jones Transportation Average gained 2% helped by the push from FedEx shares and the falling oil price.
That said, the drop in crude did little to help Dow components Exxon Mobil and Chevron, which were down about 1% each. All up, 21 of 30 Dow issues ended lower, with other big losers including IBM, Hewlett-Packard and Procter & Gamble.
On the economic front, the University of Michigan’s initial reading on consumer sentiment rose to 70.2 in September from 65.7 in late August. The read was the highest reading since June and easily topped expectations.
However, the report also showed that only 16% of consumers said their finances had improved and this was the worst percentage since the university first asked the question in 1946. Also, only 25% of consumers said they expected income gains over the next year, which leads one to think that if positive top-line consumer sentiment reads are going to provide a boost, it’s only going to be after there is meaningful evidence of a recovery in the US labour market.
In other economic news, the US Commerce Department reported that wholesale inventories fell 1.4% in July after falling a revised 2.1% in June. This was the 11th consecutive month inventories dropped and the read was well short of analyst expectations. On top of that import prices rose 2% versus forecasts for a rise of 1%, while the August Treasury budget showed the deficit grew by US$111.4bn in August versus forecasts for a deficit of $139.5bn.
Markets around the rest of the globe were mostly higher, with many indices hitting 11-month highs. The FTSE 100, France’s CAC 40 and Germany’s DAX all gained, while Asian markets excluding the Nikkei, were also higher yesterday.
Overnight in Sydney, the SPI was down 4 points at 4594, with investors taking stock of a rising Aussie and commodities prices that are otherwise softening despite the falling US dollar.
