Daily Market Reports | Apr 29 2008
By Greg Peel
The Dow closed down 20 points or 0.16% while the S&P lost 0.11% and the Nasdaq gained 0.06%. The Dow only managed up 47 at its peak before last minute selling squared the ledger. The S&P 500 tried to kiss 1400, managing only 1399 before pulling back. Traders are poised for a break of this psychological level which represents the January high.
The lack of activity reflected no major economic releases, no earnings reports of note, and the fact the Fed makes its first rate decision in the post Bear Stearns era on Wednesday night. The market is favouring a 25 point cut accompanied by “on hold” rhetoric, meaning the 2% level is favoured ahead of a rate as low as 1% as many had previously expected. The implication would be that the Fed is now comfortable with financial markets. The reality would be the Fed can’t keep ignoring rising inflation and the falling dollar. There is no sign the housing market slump has eased, and indeed it appears to be getting worse. We could well see 1% yet.
The big news in a quiet session was the takeover announcement by privately-owned confectioner Mars (of Bar fame) for publicly-listed W.M.Wrigley (of Juicy Fruit fame) for US$23bn. The finance is being provided not by a bank, but by Warren Buffet’s Berkshire Hathaway. This gave the market something to chew over.
More food for thought was provided by legendary auto billionaire Kirk Kerkorian increasing his stake in Ford to around 6% through his own investment company. It appears that while M&A levels have fallen dramatically since the onset of the credit crunch, more old-fashioned mergers based on simple equity deals and without securitised leverage have returned a means to cash in on diminished share prices. The investment banks can go get stuffed.
The US dollar pulled back after two days of gains as traders moved to the sidelines. This allowed gold to claw back US$6.60 to US$892.60/oz, while oil added US23c to US$118.75/bbl. Oil had earlier traded close to US$120 again on more terrorist activity in Nigeria and news of a refinery strike in Scotland upsetting North Sea oil flow, but traders aren’t prepared to get carried away before Wednesday.
The Aussie added back about half a cent to US$0.9392.
Base metal movements were ultimately of little consequence.
The SPI Overnight added 4 points. The local market appears to like the 5600 level in the ASX 200 for now – a nice split between support at 5500 and resistance at 5700. The market is still keen to buy financials, with resources suffering as a result. Westpac joined the club yesterday with its 10bps mortgage rate increase. The bank will report on Thursday, which will be interesting given not a lot in the way of pre-announcement news.
We can no doubt expect another quiet night on Wall Street tonight.
