FYI | Nov 07 2006
By Greg Peel
Many respected observers and technical analysts were calling a correction in the Dow this week – nothing major, just a bit of a breather.
Well forget it.
One would have been forgiven for thinking that the US mid-term congressional elections, held last night, might have been enough to put Wall Street into hibernation pending an outcome. There is a real possibility that the Democrats could gain the majority in one or both houses, and that is not something that Wall Street would normally like to contemplate.
Just some of the policy shifts that may arise under a Democrat majority are: the focus on ensuring domestic oil supply would turn into a push to promote efficient energy (bad for Big Oil); attempts to privatise social security and protect industry from lawsuits would fade as the focus turns to raising the minimum wage and reducing drug prices; the Pentagon’s drive for increased military hardware would lose out as funding priorities shift away from Iraq. (Brad Foss, AAP)
All in all, a Democrat victory would appear to be at least modestly negative for Wall Street. However, no one seems to care.
Instead, focus was on yet another private equity bid – this time a $3.7bn bid for the Four Seasons hotel chain. An interesting mix of parties makes up the consortium, led by the major shareholder, the CEO, a hotel trust owned by Prince Alwaleed Bin Talal Alsaud (believed to be the wealthiest businessman in the Muslim world), and an investment trust owned by Bill Gates (the wealthiest man in the world).
Further M&A activity in the healthcare and transportation sectors drove those indices higher, and the Dow is a long way to recouping its losses since its previous record peak of six days ago. It closed up 119 points, a nice round 1.00%, at 12,105. The S&P500 gained 1.13% and the Nasdaq 1.51%.
Continuing speculation that the Fed will not raise rates again provided some strength to the US dollar, which gave the gold market a chance to take some profits after a strong rally through the US$600/oz mark. At 4pm New York, gold spot was down US$4.30 to US$622.90/oz.
The stage is set for another record high in Australian indices today, at least until lunch time. The SPI closed up an impressive 56 points overnight. With the stock market booming, there’s likely to be some serious imbibing going on this afternoon, and Calcutta bids may also hit records as well.