Daily Market Reports | Mar 14 2009
By Andrew Nelson
The Dow rose 54 points or 0.75% while the S&P rose 0.8% and the Nasdaq 0.4%.
Markets once again rallied in New York last night, posting their first weekly gain in more than a month and the biggest weekly rise since November.
All gauges opened higher, but hopes were quickly dashed after the Dow dropped 60 points below its opening mark by midday, but then a rebound in afternoon trading revived hopes the market could extend its winning streak for a fourth straight session. And it did, if not as dramatically as the previous session.
The last time the Dow booked four straight day of gains was back in late November, which was the last time we all hoped we might have hit the bottom.
So the question that is on everyone’s lips at the closing of this week’s trade and after a more than 10% run up is: Can the rally last? Right now, the sceptics still outweigh the optimists. We all know that the banks still have more losses to book and the recession is a reality that will continue to play out over at least the short to medium term. However, there is an increasing amount of more optimistic belief that this might be the bottom we hoped we were at in November.
Some of the positive sign posts that traders and commenters are pointing at are: the increasing belief that the mark to market rule will be changed, taking some of the strain off of the bank write-downs that are still expected, the changes to the uptick rule are also imminent and US Treasury Secretary Tim Geithner’s public/private partnership bank plan now has more details. No surprise that all of this is banking and finance related and as colleague Greg Peel pointed out in yesterday’s Overnight Report, “banks usually lead the broader market out of a bear market”.
While this was the case for much of this week’s rally, today’s more subdued push higher is probably best characterised by a mixed result from the banking sector today. The KBW Bank index, which tracks the largest of the banking stocks, was actually down 1.4% on the day, while the broader S&P 500 financial sector index rose just 0.6%. Many are still questioning whether the banks have put the worst of their problems in the past.
Citigroup was one of the few major financials that was able to maintain its momentum. Shares picked up another 6.6% after Chairman Richard Parsons said on Thursday the bank doesn’t need any more capital injections from the government. He expressed confidence that Citi would remain in private hands. This followed on from comments earlier this week that the bank was profitable in the first two months of the year.
JP Morgan Chase and Bank of America also said earlier this week that the start of the year has seen some improvement. However, their results were mixed today, with the former up, while the latter ended in the red. Bank of America ended lower despite offering reassurances that it would pass government’s pending stress test, and would thus not need more Washington money.
Shares in General Motors continued to run sharply, setting the pace for the Dow for a second session after saying Thursday it won’t have to take US$2bn in additional federal loans this month because its cost-cutting efforts have improved its cash position.
But it wasn’t all good news on the street and one of the most notable black spots was a 2.5% drop in Warren Buffett’s Berkshire Hathaway on news it has been stripped of its ‘AAA’ credit rating by Fitch, barely hours after S&P cut General Electric’s top-tier rating. However, the market continued to embrace GE after a big rally yesterday due to some positive comments from the ratings agency. Shares in the US bellwether inched a little higher.
In economic news, consumer sentiment improved slightly in March as confidence in the government’s economic action plan improved. Elsewhere, the Labor Department reported import prices slid 0.2% on a monthly basis in February. This was less than the 0.8% drop expected and the smallest decline since last August. The news suggests that while inflation is currently a thing of the past, at least there’s little evidence of any outright deflation.
The US trade deficit narrowed by about 10% to its lowest point since 2002 in January due to falling prices and shrinking demand. The trade deficit has now pulled back for a record six straight months. Exports in January were 5.7% lower, while imports fell 6.7% amid flagging consumer demand as the recession continues to bite.
Comments from Chinese Premier Wen Jiabao did little good for the bond market after he said he was concerned that the rising US deficit will erode the value of China’s US bond holdings. In turn, treasury prices tumbled, raising the yield on the benchmark 10-year note to 2.95% from 2.84% Wednesday.
Oil prices fell US78c to settle at US$46.25 a barrel ahead of an expected OPEC output cut to be announced at the Sunday meeting. Gold prices continued to advance on renewed investment and technical buying, up US$2.70/oz to US$929.40/oz.
Base metals lost some of their recent momentum during late Friday LME trading, with mixed results across the complex as a bit consolidation took hold. Basemetals.com notes that end of week profit-taking and a slippage in equities also played a part in stemming advances. However, copper bucked the general trend, pushing back above the $3,700 a tonne level, only to stumble yet again at that resistance level, but it was still up on Thursday.
In currency trading, the US dollar fell versus the euro and the yen, while the Aussie was a little stronger.
The SPI ticked up 26 points.
