Daily Market Reports | Mar 28 2009
By Andrew Nelson
The Dow fell 148 points or 1.9%, while the S&P 500 dropped 2.0% and the Nasdaq ended the day 2.6% lower, but was still in positive territory for the year.
Stocks on Wall Street pulled back last night after a three-week advance that has pushed the major gauges up more than 20%, giving investors their first positive month since August 2008. Over the last three weeks, the Dow has advanced about 17% and put in its best monthly performance since 1982 on the back of a bear market rally we all were hoping for.
Still, it was a down day on US markets, with investors looking to lock in profits, especially in banking and energy stocks after these three weeks of strong gains. The prevalent underlying bearish sentiment once again reared its ugly head, with the consensus opinion still being that the rally doesn’t have the legs for the long term. Given there are only a few days left before money managers send out their quarterly statements to clients, many on the street believe that a round of so-called window dressing may be coming to an end.
But still, the selling came on the back of a two-day rally that had pushed the Dow up 21%, the index’s biggest bounce of that magnitude since 1938, reported CNBC.
There was nothing drastic about the day’s decline, with the Dow starting 100 points lower and trading in a fairly tight, sideways range of about 100 points through the day. Banking stocks were once again at the front of the action, but this time to the downside. The sector was pushed lower by comments from JP Morgan Chase chief executive James Dimon, who said in an interview on CNBC that March was a little tougher than the first two months of the year.
His company’s shares gave 5% as did Citigroup, while Bank of America shares were down 2% after CEO Kenneth Lewis also said March had been a tougher month for his bank. The comments were on the heels of a meeting between many of the nation’s top bank executives and President Obama. Other than a weaker outlook, most of the comments from the nation’s banking leaders were positive about the President’s approach.
This is certainly a different tune to the less than flattering one that many of them were suggesting after they had to face members of Congress last month.
On the flip side, Barclays rallied 21% on reports the UK lender is unlikely to need more capital after a stress test of its balance sheet by the nation’s Financial Services Authority.
While the broader building sector was also weaker, two reports from earlier this week that showed a pick-up in demand for housing were still lending a little support. Shares in KB Home rallied 12% after the builder reported a 26% rise in net orders amid a big drop in cancellations and saying its fiscal first-quarter loss narrowed sharply amid fewer write-downs.
General Motors was also looking good, with shares rising more than 6% on reports the government could extend the auto maker’s restructuring deadline, giving it more time to gain concessions from unions and qualify for more taxpayer help.
The week also saw better than hoped for economic reports on durable goods orders, which added to hopes the economy is closer to turning around. Investors have also responded well to the latest plans from the government to stabilize the financial system. The good news continued today, at least a little, after the University of Michigan consumer sentiment index rose to 57.3 in March from 56.3 in February. Consensus expectations were for a reading of 56.8.
But it wasn’t all good news on the economic front. Personal income fell 0.2% in February after rising 0.2% in January. The expectation was for a fall of just 0.1%. Personal spending rose an expected 0.2% in February after rising 1% in January.
The big question now is whether the March 9 lows will turn out to be the real bottom of the bear market. The key, short-term linchpins are still to come and will likely be some big events in April. The US government is expected to release the results of its bank “stress tests,” while the next earnings season will also begin. On top of all this, the G20 is set to gather in London to try to develop a concerted plan of government responses to the slowdown in global trade. Until these issues pan out, it is unlikely that a battered investment community will be ready to declare the worst over.
The US dollar rose against the euro and picked up a cent and a quarter on the Aussie, but fell against the Japanese yen amid expectations there is a serious stimulus package from the Japanese government in the offing. Meanwhile, Treasury prices fell, raising the yield on the benchmark 10-year note to 2.76% from 2.73% Thursday.
Gold dropped US$9.50, erasing most of yesterday’s gains. The damage was done on the back of a stronger USD, if you take the yen out of the equation.
US light crude oil for May delivery fell US$1.96 to settle at US$52.38 a barrel on the New York Mercantile Exchange. While the recent pick up in the USD can take some of the blame here as well, news that OPEC was still well above its targeted production levels for March didn’t help sentiment.
Base metals were a bit of a non event on LME trade last night in typical, end of week fashion. Prices were up and prices were down and trading was less than active. While prices were pretty much 2-4% lower across the board, basemetals.com notes there was a broadly upbeat feel to sentiment. Here’s hoping.
The SPI was down 37 points, or just over 1% at 3640.
