Daily Market Reports | May 31 2008
By Greg Peel
The Dow was as good as unchanged at down 7 while the S&P gained 0.15% and the Nasdaq, spurred on by the solid result from Dell, jumped 0.6%. Tech is largely playing its own game at the moment, spurred on by a week of weaker oil prices. Before you ask – up US73c to US$127.35/bbl. Oil finished up 12% for the month.
All week there had been a build up to the US personal income and spending data for April as Wall Street looked for signs of either expected weakness or surprising resilience at the consumer level. As it was, the numbers revealed personal incomes up 0.2%, personal spending up 0.2% and consumer prices up 0.2%. Not only were these numbers as expected, they represent a cancel-out result. Americans spent only as much as increased inflation determined and what more they earned was offset by that inflation. The core personal consumption expenditure deflator – a fancy name for another measure of inflation, rose a timid 0.1%. As we all know, there is no inflation in the US, just everywhere else in the known universe.
So with a big sigh of relief Wall Street went about tidying up positions for the end of the month and the end of the week. The Michigan University consumer confidence index for May showed a fall to 59.8 from 62.6 in April, to reach its lowest level since 1980, but everyone’s pretty immune to these sensationalisms by now.
Oil fell over US$1 early in the session to continue its recent pullback, but squared up as the day wore on. Apart from all the usual factors affecting the oil price, traders had become a little spooked by overt moves from the Commodities and Futures Trading Commission to investigate speculative activity in oil trading. The regulators are under pressure to find a scapegoat to blame for US$4/gal gasoline. Gasoline is, after all, more sacred than apple pie. Were the CFTC to recommend some tightening measures – perhaps on size limits or deposit requirements etc – then the oil price could see a further drop on that basis alone.
On the flipside, however, is that Sunday marks the official start of the US hurricane season. The weather bureau has already suggested a better than average chance of hurricanes this year, and oil traders have watched as a series of destructive tornadoes have ripped through America’s heartland this week. Mother Nature is looking angry, and that doesn’t bode well for the Gulf.
When Katrina hit in September 2005 oil jumped from below US$60 to above US$70 in a move of around 25%, before the government released strategic reserves and the price fell back below US$60 again by year’s end. The Israel-Lebanon war then took oil to US$80 in early 2006.
So no one wanted to take much of a position home for the weekend, and the same was true elsewhere. The US dollar eased slightly, gold rose back US$8.70 to US$886.10/oz, and the Aussie slipped back down to US$0.9565.
Base metals had a choppy session as traders skirmished while squaring up longs or shorts. Tin tired to drop heavily once more, but fought back in late trade. The others were slightly stronger after a bad week.
The SPI Overnight was up 15 points.
