Daily Market Reports | Apr 01 2008
By Greg Peel
The last day of the quarter can often be a frenzied one in any stock market, and quite volatile, as one side tries to dress up returns for the period while the other is unwinding positions. But on the last day of the worst quarter on Wall Street since 2002, and the worst first quarter since 2001, it was a case of “Thank God that’s over”. No one was encouraged much to sell, but then nor was anyone much encouraged to buy, given any rallies recently have simply been traps.
The Dow closed up 46 points, or 0.4%. The S&P gained 0.6% and the Nasdaq 0.8%. For the quarter, the Dow lost 7.5%, the S&P 10% and the Nasdaq 14%.
The greater fall in the two broader indices are indicative of the hardest hit sectors over the quarter – financials and tech, both of which fell 14%. The financial sector began life pre-credit crunch as 20% of the S&P 500, whereas tech dominates the Nasdaq.
There was good and bad news on the Street last night, none of which could get a rise out of anyone. On the economic data front, the Chicago purchasing managers index, which is taken as an indicative precursor to tonight’s ISM manufacturing index, rose to 48.2 in March from 44.5 in February. This was better than the economists’ expected 47.3. However, anything under 50 still implies contraction.
A couple of the bigger Dow stock movers included Citigroup, which announced the splitting off of its credit card business from its consumer banking business as a means of simplifying what had become an inordinate mess. This is the first such move amongst the US banks, and certainly won’t be the last. Citi shares rose 3%. Merck was a big mover to the downside, as medical researchers announced its popular cholesterol drug did little to prevent heart disease after all. Merck fell 15%, while Merck’s partner on the drug – Schering-Plough – lost 26%.
US Treasury secretary Hank Paulson delivered a 218-page document of proposals for sweeping changes to regulation and scrutiny in the mortgage and investment markets. While regulation is the enemy of free markets, and investment banking in particular, no one much blinked. Such a move has been expected, and it’s coming from a lame duck administration anyway. If the other lot get up it could be much worse.
The US dollar – in which the world is largely set short – rallied against all major currencies last night as some traders would have squared up for the quarter. The Chicago index might have helped a bit too. The Aussie fell half a cent to US$0.9125.
Commodity prices thus responded to the higher dollar, and book-squaring to boot. Oil fell US$4.04 to US$101.58/bbl. Gold fell US$14.20 to US$917.20/oz. Silver fell US33c to US$17.22/oz.
It was a lacklustre affair as well on the London metal markets, where the complex drifted slightly lower. Lead’s 2.5% fall was the only stand-out.
The SPI Overnight gained 14 points.
After a similarly quiet day on the local bourse yesterday, the ASX 200 index closed down 15.5% for the quarter. If one takes the S&P 500 as the benchmark equivalent, the Australian market has faired 50% worse this quarter than the US market, in which all this heartache is sourced. Who is to blame? The stock analysts and strategists who kept beating the “immune” drum all through Christmas? Or the margin lenders such as Opes Prime, now deceased, who tied Australian investors up into leveraged deals of high-risk complexity? Or certain CEOs, now deservedly bankrupt, who were economical with the truth?
It doesn’t matter now – it’s a whole new quarter.
