Daily Market Reports | Sep 19 2009
By Andrew Nelson
The Dow finished 36 points or nearly 0.4% higher, while the S&P 500 advanced 0.26% and the Nasdaq finished almost 0.3% better off.
Blue chips pushed to fresh one-year highs with investors erring towards improving economic conditions rather than faltering because of the speed of the rally and the possible threat posed by the “quadruple witching” quarterly options expiration. The expiration of four contracts, including stock index futures, stock index options, stock options and single stock futures happens once each quarter and it is normally a volatile and high volume day for markets.
But in the end, the options expiry proved to be a catalyst if anything. Yes the volumes were high, but there was really little volatility from the indices today, or over the week. They have gone up (and down a little yesterday), but not in any notable way. Activity did start to taper off in the afternoon, but this was more due to the start of Rosh Hashanah, the Jewish new year, which saw a number of traders head for the door early.
After the closing bell the S&P will rebalance. This is a process that has a number of index-fund managers scrambling to add or subtract from their portfolios the individual stocks whose weightings are due to change. This added to the volumes. The rebalance will see one of the stocks we’ve all come to know real well, Citigroup, re-enter the S&P 500 after its time in the wilderness. Shares in the big name bank still ended lower.
The market has now closed higher 9 out of the last 11 days and for the week, the Dow gained 2.24%, the S&P 500 rose 2.45% and the Nasdaq closed up 2.5%. For the month, the Dow is up more than 3% so far, the S&P 500 has booked a gain of 4.4%, and the Nasdaq is up 5.9%.
Since bottoming at a 12-year low March 9, the S&P 500 has gained 58% and the Dow has gained 50% and the Nasdaq has gained 68%, as slowly improving economic news and large amounts of fiscal and monetary stimulus have helped to support investor confidence. The psychologically important 10,000 mark for the Dow is now less than 200 points away.
And while there were some pretty widespread fears in late August that stocks could pull back this month, it seems markets have instead shifted into yet a higher gear as more and more money enters. Investors who might have missed out on some of the upside so far are now getting busy to ensure they don’t miss out on yet more, and as such, seem to be increasingly eager to put their cash into equities.
Consumer companies led the broader market today, and Procter & Gamble led the sector, with shares jumping 3% after Citigroup upgraded it to Buy from Hold. The stock was among the Dow’s biggest gainers, but there were plenty of other top tier names that joined in on the party. To name a few: Home Depot, Pfizer, Coca-Cola, AT&T, Hewlett-Packard and oil majors Chevron and Exxon Mobil, despite a slip in crude prices.
Another bit of good news was evident in the performance of a couple of key home-builders. Both Toll Brothers and KB Home finished more than 2.5% higher after being upgraded by JPMorgan. The broker said the housing sector will continue to recover in the next two years. The Dow Jones US Home Construction index jumped 1.7%.
An Australian bank also had some impact in New York last night, with shares in Apple rising after an upgrade to Outperform from Macquarie. Maccas said it is “increasingly confident that Apple has negotiated the worst of the consumer recession”, believing that the iPhone would continue to dominate the smartphone market over the next year.
On the economic front, the states of Michigan, Nevada and three others booked unemployment rates that were above 12% in August. The news follows the US Labor Department’s report yesterday that showed a surprise drop in weekly unemployment claims. But as colleague Greg pointed out in yesterday’s Overnight Report, it’s a good idea not to get too caught up in each week’s jobless data, but rather step back and watch wider trend develop.
The US dollar was actually stronger, with traders getting ready for next week’s meeting of Federal Reserve policy makers. The dollar index rose more than a third of a percent to 76.46 after losing 0.23% on the week and hitting a new 12-month low yesterday. In the end, the greenback was higher against the Aussie, euro and yen, with profit-taking kicking in on the view that a test of the 76.00 level might just be a bit too far for now.
Crude-oil futures booked a second straight day of declines, not helped by the dollar gaining back some lost ground. Crude oil for October delivery finished down US43c at US$72.04 a barrel, but still gained nearly 4% on the week on the back of upbeat US economic news, a bigger-than-expected drop in US inventories, and the weakening dollar.
The greenback also did a little job on gold, which finished what was a volatile session slightly lower. In the end, gold was down US$5.70 to US$1,007.20, but was still up 0.4% for the week, which was marked by fairly upbeat economic data that encouraged more investors to take risks, which served to push the dollar lower until today.
The stronger dollar also offered little help to the cause of base metals, which closed near the bottom of the day’s range in London overnight. The complex spent the day in the red column, with copper and aluminium in particular hit by end-week speculative liquidation. Copper ended over three percent lower, aluminium was down 2.5% on the day, while continued volatility saw lead finish 3.8% lower.
Global markets were mixed, with London’s FTSE 100 ending higher, but France’s CAC 40 and Germany’s DAX both down. In Asia yesterday, markets also ended lower.
Even closer to home, the SPI was offering a slightly positive signal for Australian investors, picking up a modest 7 points 4690.
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