Daily Market Reports | Apr 09 2013
By Greg Peel
The Dow closed up 48 points, or 0.3%, while the S&P gained 0.6% to 1563 and the Nasdaq added 0.6%.
And they’re off. Aluminium producer and Dow component Alcoa kicked off the US March quarter earnings season last night after the closing bell, releasing a mixed result. The company beat expectations on earnings, but missed slightly on revenue, which has been a common theme for US corporations since, well, 2009.
The Alcoa result is nevertheless no longer considered a leading indicator for results in general and we’ll have a lull in highlight terms until Friday when the more indicative banking sector begins to roll out the numbers. JP Morgan (Dow) and Wells Fargo will be the first off the rank. Expectations for net S&P 500 earnings growth for the quarter currently sit at a timid 1.6%, down from a 4.3% forecast in January and compared to the December quarter’s ultimate 6.2% result.
That 6.2% followed consensus forecasts ahead of Alcoa last quarter that were all but flat, having fallen steadily over the quarter. Will the pattern repeat to provide upside surprise again? The predominant factor worrying analysts this time around is the currency drag, given the US dollar has strengthened significantly over the quarter in the face of a Cyprus-weakened euro and a severely devalued yen.
Last night’s session on Wall Street followed a familiar theme as well. Friday’s weak jobs number sparked a 172 point fall in the Dow before the ever present bargain hunters lurking under the floorboards slowly pushed the average back to only a 40 point loss. Last night the Dow opened down 68 points and the song remained the same, as buyers pushed the average to a rise of 48 points by the closing bell. That weak jobs number is now priced out.
So what has to happen for Wall Street to actually correct? Cyprus didn’t do it, North Korea can’t do it, Japan’s stimulus measures undermine US exports, but are generally seen as a positive, and on the home front any stumble in the US economic recovery just extends the Fed’s defence program. Earnings could do it, but expectations are already low. Perhaps what Wall Street needs is another decent kick up and then, when everyone is positive, a fall back to the previous 2007 highs. As they say in the classics, it can’t go up forever.
The US dollar also shook off the jobs number last night in rebounding 0.25% to 82.77 as the Japanese bond buying program finally kicked off and the dollar approached the magic 100 yen. But yen selling is not directly offset by US dollar buying, with forex traders citing the likely destination as, you guessed it, the Little Aussie Battler. The Aussie is up 0.25% to US$1.0412.
The safe haven plays also retreated last night as the stock market made it clear weak economic data were of no concern. The US ten-year bond yield bounced back 4 basis points to 1.73% and gold fell US$9.50 to US$172.80/oz.
Base metals were all up marginally, while Brent crude rallied US54c to US$104.66/bbl and West Texas gained US89c to US$93.59/bbl. Spot iron ore rose US$1.70 to US$137.60/t.
The SPI Overnight rose 18 points, or 0.2%.
The Australian stock market has recently been taking a lead out of a skyrocketing Japanese stock market as much as Wall Street, but attention turns to China today with the release of March inflation data. The Chinese CPI has ticked up these past couple of months, offering concern that Beijing may be again forced to apply the brakes on what today is less robust economic growth than the halcyon days of the past.
Locally, business confidence will be in focus today with the release of NAB’s monthly survey.
Rudi will appear on Sky Business today at 5.30pm.
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