Daily Market Reports | Apr 04 2009
By Andrew Nelson
The Dow finished 0.5% stronger at 8017, while the S&P 500 broke through the 840 technical barrier ending the day almost 1% better off. The Nasdaq closed 1.2% higher.
In what’s become a fairly common Friday routine, the broader market cooled after running hot for most of the week, with stocks oscillating mildly between positive and negative territory for much of the day. Investors shrugged off a report showing unemployment jumped last month to its highest rate since 1983, with a late run keeping all gauges firmly in positive territory.
The recent strength is not so much about good news, but rather less bad news than there could be ahead of what will be a flood of ugly corporate earnings due to begin with Alcoa next week. According to research firm Thomson Reuters, Wall Street expects earnings at S&P 500 companies will show a decline of about 37%, the eighth straight quarter of shrinking profits.
But for now, optimism continues to build on hopes that the worst is over and that some of the government’s attempts to help the financial sector and economy will work. Today’s late push cemented four straight up weeks for the Dow, which has gained around 22% over the last month to post its best monthly run since 1933.
Yet while investors may have shrugged off the jobs report, it is nonetheless worth keeping in mind that employment is ever a lagging economic indicator and is usually the last to recover. The read saw employers cut 663,000 jobs from their payrolls in March versus an expected 650,000, after cutting a revised 651,000 in the prior month. The unemployment rate, generated by a separate survey, rose to 8.5% from 8.1% in February. This outcome, which is the highest since November 1983, was still in line with estimates.
In other economic news, the Institute for Supply Management released its services sector index for March. The index fell to a disappointing 40.8 from 41.6 in the previous month. The market was hoping for a rise to 42, with the undershoot certainly supporting the fact that the broader US economy remains in poor condition.
Tech stocks were some of the day’s biggest stand outs, which saw the Nasdaq post a better performance than the broader market. The gauge is up about 25% over the last month and has booked the best month in its history. Talk on the street is that most of the tech sector’s recent strength is coming from retail investor moving back into stocks thanks to the recent rally.
Research in Motion reported higher quarterly earnings that beat estimates late Thursday and the Blackberry maker also forecast first-quarter profit above current estimates. The stock jumped 20% and was among the Nasdaq’s most-actively traded. IBM and Sun Microsystems ran 1% and 3.4% higher, with the companies now in the late stages of a deal for IBM to buy Sun for US$9.55 a share, according to reports. Although, the reported price is about US$1 less than the figure previously floating around.
Energy stocks also maintained their recent momentum as the prospect of government intervention globally has begun to fuel hopes for increases in demand both in the US and overseas. News that Congress approved President Obama’s US$3.6 trillion budget that includes massive spending increases in health care, education and energy certainly helped. All up, the S&P 500 energy sector index rose 1.4%, while the tech sector gained 1%.
Bank stocks clawed back earlier weakness that saw the sector spent most of the morning deep in the red after the prior day’s changes to mark-to-market accounting rules lifted the entire market yesterday. Royal Bank of Scotland was one of the sector’s biggest stand outs on the upside, with shares jumping more than 15% after the company said it was cutting jobs and acknowledged mistakes made in its 2007 acquisition of ABN Amro.
Light crude oil for May delivery fell US13c to settle at US$52.51 a barrel on the New York Mercantile Exchange, with the unemployment data keeping oil speculators, at least, focused on the weak economy. Crude had jumped nearly 9% on Thursday on hopes that G20 actions would spur an economic recovery.
Gold futures fell below US$900/oz posting a loss of around 3% for the week.
In currency trading, the US dollar fell versus the euro and gained against the yen. All up, the greenback was down 1% on a broad basket of currencies for the week. The Aussie traded at US71.47c.
Base metals were stronger across the board, with copper futures rising above US$2 a pound for the first time since November as fund managers began moving back into the metal. On LME trade, basemetals.com reports that copper jumped to a new five-month high on a flurry of short-covering, which combined with the week’s economic cheer and the G-20 package, has set the whole complex off on a strong start to the second quarter.
Aluminium was also at a ten-week high in after-market trade. The price has pushed as high as US$1,490 a tonne, its highest level since mid-January. Nickel closed at a new six-week high, while lead prices, which had oscillated around parity, closed a little firmer, as did zinc. And even though tin stocks ballooned by almost 6%, prices cut losses to close at a new three-week high.
The SPI was up 33 points at 3773, pointing to an equally optimistic start to trade in Australia on Monday.