Daily Market Reports | Nov 26 2009
 By Greg Peel
The Dow closed up 30 points or 0.3% while the S&P added 0.5% to 1110 to a new high and the Nasdaq added 0.3%.
It was an exciting day on Wall Street. It was just a pity no one was there to see it. On little volume, the Dow hit a new post-GFC high and the S&P 500 ticked ever so slightly to a new high as well. It’s Thanksgiving tonight in the US and everyone was at the airport.
The world nevertheless had taken time to further mull over Tuesday’s release of the minutes of the last Fed meeting and decided that there would be no action to prop up the reserve currency for a while yet. Given the risk trade has been in a speculative dollar-related bubble for several months, particularly forcing commodity prices well above actual demand levels, the Fed’s first acknowledgement that there “might” be such a dangerous trade eventually on a weaker dollar meant the dollar hasn’t got there yet. So it tanked last night, falling over 1% to 74.23 on its index to a new 15-month low.
The fall was assisted by economic data, and in particular the extremely volatile and unreliable (many traders refuse to acknowledge it) new jobless claims number. The number of Americans applying for unemployment insurance last week fell by 35,000 from the week before to 466,000 – the first number under 500,000 post-GFC and the lowest week of new claims since September 2008. This sent the stock market running early on.
But the sceptics were quick to chime in, saying statistical smoothing rendered this a pre-Thanksgiving abberation. The four-week running average of new claims dropped a mere 26,500 to 496,500. But let us not quibble before the holidays.
Particularly because sales of new homes jumped 6.2% in October to be at their highest level since that same September 2008. When it was announced earlier in the week that sales of existing homes had jumped 10%, the sceptics said only new home sales really matter. Now that new home sales have beaten all expectations, the sceptics point to the government grant package which is due to expire this month.
You’d think this would be enough to instill a bit of confidence in the US economy, but no – the Michigan Uni consumer confidence measure this month was revised to a fall of 67.4 from 70.6 for November after previously registering a 66.0. (This number is reported twice in a month, the second time a revision. Not even academics can get it right the first time.) So glass half full it was a better number once revised and glass half empty it was still a fall in confidence prior to Christmas.
And don’t mention durable goods. New orders for non-consumable goods fell 0.6% in October following a 2.0% rise in September. Ex-defense spending however, they rose 0.4%. Glass in the middle again.
All of this wonderful news might have spurred Wall Street on further on any other day, but as noted earlier only three men and a dog were on board to witness it. There’s no Thanksgiving in Europe though, and traders there pushed the euro over the magic US$1.50 mark to US$1.5137. For the first time since July 2008, the Swissy fell under parity. Where was the ECB this time? Australia featured in the news again too, as deputy governor Ric Batellino talked up the global economy in a speech yesterday and cemented the December rate rise (next week). The Aussie jumped one and a quarter cents to US$0.9321 as the US dollar capitulated.
But forget the stock market. Yesterday an Indian newspaper speculated that the Indian central bank may buy the other 200t of gold on offer from the IMF. Gold subsequently shot up again (and the dollar shot down) by US$22.60 to US$1190.10/oz and new blue sky. It ain’t over yet. The big gold spikes of the past few years have began late in the year and rocketed through Christmas before peaking out some time after January.
Oil bounced back US$1.94 to US$77.97/bbl. Speculators rushed into base metals in London as real traders sat dumbfounded on the sidelines. Tin was up 0.5% while everything else was up 1-2%.
Investors also swamped the US Treasury’s 7-year note auction as the 30-year fixed mortgage rate fell to 4.78% to match the record low set in April when the Fed began buying up mortgage securities. That’s a full 1% below one year ago. The 7-year yield achieved by the Fed was the lowest ever. As long as the Fed is not going to raise rates in this lifetime, US bonds are highly sought after. Give me sunshine, give me rain.
Give me a break.
The SPI Overnight was up 24 points or 0.5%.
Let us all give thanks for America tonight – it might be our last chance. There will be no Overnight Report tomorrow but there will be one on Saturday to cover what should be not much at all. The NYSE will close at 1pm on Friday.
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