Daily Market Reports | Nov 14 2009
By Andrew Nelson
The Dow finished 73 points or 0.7% higher, while the S&P 500 advanced 0.57% to 1093 (below the high) and the Nasdaq advanced 0.88%.
What was a fairly mixed bag of economic news didn’t stop investors buying up the shares of companies that were beaten down a bit yesterday and cementing in another positive week. A trickle of upbeat news from the retail sector kindled hopes for strong sales in the holiday season, which would be a much needed sign the economic recovery is gaining momentum.
In economic news the University of Michigan reported consumer sentiment unexpectedly fell to 66 in early November from 70.6. This is its lowest level in three months and well below the 71 the street was expecting. The US Commerce Department chimed in with news the trade balance between US imports and exports grew more than expected in October, to US$36.5 billion. Import prices climbed 0.7%, taking the read to its highest level in more than 10 years.
On the other hand, economic news from overseas was positive. Germany and France both booked their second straight quarters of growth, while IMF managing director Dominique Strauss-Kahn said he doesn’t see a double-dip recession.
However, investors were more focused on the reports from retailers JC Penney and Abercrombie & Fitch, which helped undo some of the damage done earlier in the week by a glum outlook on spending from Wal-Mart Stores. An above expectation result from Disney that came out after the bell last night was also a positive factor.
In fact, Disney was the day’s biggest gainer on the Dow, running 4.8% after the entertainment giant beat expectations for both earnings and revenue. Meanwhile, shares in J.C. Penney ran more than 6% after the department-store operator reported a decline in profit, but still raised its full-year forecasts. Teen chain Abercrombie & Fitch rallied almost 10.5% after beating earnings expectations.
There was also good news in the IPO market for retailers, with discount shop Dollar General picking up more than 8% on its debut on the New York Stock Exchange. McDonald’s and American Express were the number two and three gainers on the Dow. Amex, which is one of Warren Buffett’s key holdings, has doubled since the start of the year.
Retail results will feature just as prominently next week, with October retail sales figure due out Monday, plus more earnings from companies like Saks and Target are also due to hit. CNBC’s Bob Pisani notes that many key retail stocks remain at near 52-week highs “because gross margins are improving due to lower inventories (so there are less promotions), and costs are much lower”. Another factor helping margins is the strength of private label brands, with both Kohl’s and JC Penney already reporting strong private label sales, which of course carry a higher gross margins.
A slide in the US dollar after its recent revival was also a boon for equities. Looking at the charts, the Dow started the day higher, then retreated briefly before rallying toward the closing bell. This was almost a mirror image of the early upswing in the US dollar and its fade though the rest of the day. This inverse relationship between stock and the dollar has a lot to do with Wall Street’s desire for cheap money to keep flowing into the US economy. While cheap money translates to a weaker greenback, it also keeps the bulls betting that some of it will make its way to the financial markets. This in turn should help to support and other investments even if employment and other economic measures remain weak.
The US dollar lost ground against most major counterparts, falling for the first day in three, with investors looking to take some profits on the greenback’s recent bounce. The US dollar index, which is a measure of the US currency against a trade-weighted basket of rival currencies, gave up half a percent. The US Dollar lost about 1.3% against the Aussie. The weaker dollar also provided a big boost for gold, finishing the session up more than 1% and gaining almost 2% on the week.
Crude oil was unable to reap any benefit from the weaker greenback, however, finishing 0.8% lower on the day and down 1.4% for the week. The weak read on US consumer sentiment wouldn’t have helped, as it would have been taken as a sure sign that the outlook for energy demand is not yet ready to improve. Crude for December delivery finished the session down US59c at US$76.35 a barrel on the New York Mercantile Exchange.
The declining US dollar did do the trick for base metals, with the complex pulling back from some minor lows to tack on gains of less than 1% across the board. The exception was zinc, which climbed 1.1%, snapping a run of almost two weeks of declines. Lead was up almost 1% despite inventories rising to their highest point since December 2003, while copper added 0.7%, as industrial action continued to support prices. Workers at BHP’s Spence mine in Chile are reportedly threatening to escalate action, while Vedanta’s Konkola copper mine has also been hit by a strike and there is also talk of a walkout at Antamina in Peru.
Australian investors looked poised to ride the wave that a rising Wall Street should generate, with the SPI tacking on 25 points or nearly 0.6% in overnight trading.
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