FYI | Jul 25 2006
By Greg Peel
The Dow Jones Industrial Average was up 182.67 to 11,051.05 last night, up 1.68%. The Nasdaq rallied 2.05% and the S&P500 1.66%.
The trading floor of the NYSE is either a scary place to be at the moment, or an exhilarating one, depending on your penchant for panic. I might have to stop writing these "whoa, check out Wall Street overnight" stories if movements of plus 1% in either direction become too much the norm.
Last night, the war in the Middle East was all but forgotten, despite Condy’s trip to Lebanon not inspiring any further thoughts of ceasefire, and Syria starting to flex its muscles. The oil price also rallied back over the US$74/bbl mark, which is good for some and not for others. Notably, this was not due to war news but to talk of a storm brewing in the Gulf.
The focus was once again dominated by the earnings reporting season, but last night the news was good. What? You mean we’ve been fighting Eurasia all this time and really we’re at war with Oceania? Hurry! Start buying madly!
The big news was the world’s biggest ever LBO, turning the US$33bn healthcare provider HCA Inc private. Pharma also performed well with Merck posting a good result. More M&A speculation pervaded, and some of the previously hammered tech stocks found support. Embattled Dell was upgraded to Buy by Citigroup and rallied back 4.2%.
The reality is the US indices had probably been oversold. The other reality is that wars usually lead to initial sell-offs followed by eventual strong rallies. In this case it’s not so clear given the significant potential implications for the oil price, and talk of a potential US slowdown.
Elsewhere the world is looking to raise rates – Japan, Europe and China most noticeably. Expert Dennis Gartman suggests this may not be good for the gold price, and is starting to wonder about his very bullish call. Gold is trading around US$615/oz. Strength in the US dollar is offsetting any inflation or general global tension fears at present.
Base metal prices were mixed overnight.
Subscribers please note: FN Arena now provides a more comprehensive overnight report – every day – in our new "(more) Sources of Wisdom section". This report comes to us courtesy of Egoli. BoardRoomRadio, in the same section, produces each morning an audio-video morning report.