Daily Market Reports | Jan 29 2014
By Greg Peel
The Dow closed up 90 points or 0.6% while the S&P rose 0.6% to 1792 and the Nasdaq gained 0.4%.
Despite the SFE’s print on the SPI Overnight yesterday the futures fell a total of around 80 points from Friday, not 114 as it appeared, and when the physical market opened that’s about what we saw in the ASX 200, briefly, by the time the opening rotation completed. But the buyers were lined up in their ranks, and by 12.30pm, Bridge Street was only down 27 points – a rather remarkable achievement given the extent of weakness on Wall Street.
It wasn’t to last nevertheless, and having missed out on the opening plunge, the sellers saw the opportunity to hit the bids in the afternoon. We closed down 66 points or 1.3%.
The rally which began with QE1 in 2009 was regularly punctuated with pullbacks of 5-10% up until 2012. Such pullbacks suggest a healthy rally that is never able to get too far ahead of itself. But for twelve months we have seen an acceleration in the rally with no such pullbacks, leading many to call the market precipitously overbought. Is 2014 the year for the overdue pullback? Well not yet, it would seem. Neither Wall Street nor Bridge Street seem able to gain any downward traction. Once we panicked over Greece and Spain and the US credit rating and the Chinese slowdown but now, it seems, we’re over it. The Fed is about to turn off the QE tap, emerging markets are collapsing, and all anyone wants to do is look for an opportunity to buy.
What will it take to shake the market?
After five down-days on Wall Street, the buyers were back at it last night despite a Fed statement being due tonight. The Fed is expected to announce that tapering will now actually begin, and that another incremental reduction will follow. Such an announcement will fittingly bookend Ben Bernanke’s legacy as he departs to take up gardening, and no doubt becomes rather heavy handed with the fertiliser. But such an announcement will also stir up those who believe the end of the world is now nigh.
Throughout all of this, the retail money is still sitting in cash, as retail investors remain undecided about getting in. Maybe a correction is exactly what’s needed, if we ever see one.
Last night’s bounce on Wall Street was aided by some positive economic data and corporate earnings results. It was also achieved despite market cap heavyweight Apple failing to sell as many iPhones as expected, as announced after the bell on Monday night.
US durable goods orders fell 4.3% in December but then Boeing took 319 orders for new planes, so that will appear in this month’s numbers. For the December quarter, durable goods orders ex-planes rose 6.5%, which is the best result since the March quarter 2012.
The Case-Shiller house price index dropped 0.1% in November but then it always drops in November ahead of winter, and indeed this was the least negative result since November 2005. House prices rose 13.7% from November 2012.
The Richmond Fed manufacturing index fell to 12 this month from 13 in December, but 12 is still a solid pace of expansion.
And the Conference Board consumer confidence measure leapt to 80.7 from 77.5 in December when economists had expected a fall to 77.1.
On the earnings front, Dow components Pfizer, Ford and DuPont all beat earnings expectations, with Ford also beating on revenue. Apple, which is not in the Dow but is in the S&P and represents a big chunk of the Nasdaq, saw its shares fall 8%.
The US dollar ticked up 0.1% last night to 80.56 and gold was steady at US$1251.20/oz, ahead of tonight’s Fed statement. The Aussie is 0.3% higher at US$0.8775.
Base metals have now gone quiet in London with China shutting down from today. Spot iron ore fell US40c to US$123.90/t and there it will remain for a week. The consumer confidence report was a fillip for West Texas crude, which jumped US$1.60 to US$97.32/bbl, closing the gap somewhat on Brent, up US29c to US$107.37/bbl, as should be the case now the Gulf pipeline is open.
The SPI Overnight rose 2 points.
As noted, China will shut down from today for the New Year holiday and not reopen until Friday week, albeit there will be a couple of data releases in the period. This Friday is New Year’s Day.
The Fed will release its latest monetary policy statement tonight. After all the fear and loathing of 2013, the suggestion now is if the Fed decides not to press on with tapering, Wall Street will tank on the implication the US economy is not strong enough.
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