Daily Market Reports | Sep 18 2009
By Greg Peel
The Dow closed down 7 points or 0.1% while the S&P slipped 0.3% to 1065 and the Nasdaq also slipped 0.3%.
For the past few days Wall Street has opened lower, either responding to some weak offshore influence or for no other reason than it has been running hard to the upside of late. But on each occasion, early weakness has been brief and the buyers – considered to be mostly those who have missed out to date – have pushed the indices to ever higher closes. Last night, however, Wall Street opened higher.
But this time there was no buying support, probably because there was no “dip”, and suddenly a confused Wall Street was unsure how to respond. Having peaked early at up 63 points, the Dow quickly fell to be down 42, rebounded for another attempt, but failed at the close and finished slightly in the red. The failure to post a fourth consecutive solid up-day came despite some otherwise positive economic data.
The Philadelphia Fed index of economic activity is considered the most indicative of all Fed regional indices given the concentration of industry in the region. It is a zero-neutral index (not a 50-neutral like many others) and last month a reading of plus 4.2 marked the first crossover into positive territory following a long period of contraction during the recession. Economists expected the September reading to be around plus 9.0 but it came in at plus 14.1. The Philly index followed a similarly positive result in the Empire State index released earlier in the week.
August housing starts were also released, and at a 1.5% gain marked the highest level since November. The figure was in line with expectation nonetheless, but what was interesting was the breakdown. After six months of increases, starts of single-family homes actually fell 3.0% in August. The net positive result was therefore due to multi-family (apartment block) starts, which leapt 25.3% in August after having spiralled down for many months. Clearly this is a “bulkier” figure and it is coming off a very low base. Permits approved to build new dwellings rose 2.7% in August, again the highest level since November.
It was weekly jobless claims night once again, and despite this result providing a weekly rollercoaster at best the importance of unemployment in today’s market means jobless claims are closely watched. Economists were expecting new claims to increase last week but instead they fell 12,000 and affected a drop in the running monthly average to 563,000. The bad news, however, was that continuing claims ticked up again to 6.23m when they were expected to remain steady at 6.1m.
Health officials warn that despairing over each week’s jobless data can lead to some time-out required in a padded room, and advise investors to simply stand back and let the wider trend develop. And at present, US unemployment is still rising, albeit at a slower pace than earlier in the year.
A choppy and uncommitted stock market led to choppiness and uncertainty elsewhere in markets overnight. Once upon a time, it was a conflagration of external factors – currencies, commodity prices, gold prices etc – that would have an influence over the stock market in a session. Nowadays those other market traders will tell you “we went up and down with the Dow”. Stock traders will tell you “we bought resources stocks because metals were up in London”. It is hard not to consider at present, at least in a temporary sense, that the word “bubble” might be appropriate.
Take copper for example, the price of which is up about 17% in the last month. One merchant trader, speaking to Basemetals.com in London last night, noted:
“Physical demand for copper has almost entirely stopped at these levels in Asia. It’s not much better in the US and Europe has only slightly recovered. Near or close to [US]$6,500, the Chinese are not buying either”.
Copper peaked at US$6,549/t late in August and posted a fall last night of 1.7% to US$6,362/t. Other metals fell by smaller amounts after bouncing around all session, although volatile lead dropped 4% and aluminium managed a 0.5% rise.
Gold is another case in point. Traditionally, gold mining stocks follow up the gold price but not in an equivalent measure given the inherent risks of actual gold production. In this latest rally from US$950 through US$1000/oz however, gold stocks have actually outperformed the underlying metal, based on what one might only consider to be exuberance on the one hand or previous underweighting on the other. After few good days gold slipped back last night, but only by US$3.90 or 0.3% to US$1012.90/oz. But this was enough to see leading gold stocks post falls of around 5%.
Gold was down ostensibly because the US dollar, after bouncing around all session, finished a tad higher at 76.27. Oil was similarly volatile before finally losing only US4c to US$72.47/bbl.
The ASX 200 attempted to post another triple-digit gain yesterday but in the end it, too, ran out of puff. Not that a 64 point gain was anything to sniff at, but with the SPI Overnight down 20 points or 0.4% and it being a Friday after a solid week of gains I can feel some profit-taking coming on for the weekend.
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