Daily Market Reports | Oct 13 2009
By Greg Peel
The Dow closed up 20 points or 0.2% while the S&P added 0.4% to 1076 and the Nasdaq was flat.
About 500 years ago an Italian explorer, retained by Spain, managed not to sail off the end of the earth. The Columbus Day bank holiday is thus specifically celebrated by America’s Italian community, highlighted by the Columbus Day Parade, and Wall Street becomes eerily quiet without its usual large contingent of wise guys. The NYSE is nevertheless open, as are futures markets, with only bonds and general banking activity taking the break.
On this day in 2008, the Dow rallied one thousand points – its biggest ever nominal jump. But it was only a blip in the continuing bear market. On this day in 2009, both the Dow and the S&P 500 closed at new highs post the Lehman-led collapse. Volume, nevertheless, was minimal.
The Dow surpassed last month’s high of 9829 to close at 9885, although it hit 9931 mid-session. This was just shy of last month’s intraday high of 9937. Similarly, the S&P passed 1071 to close at 1076 having hit 1079. The previous intraday high was 1080. The small crowd at the NYSE became excited around 11am about a possible “Dow 10,000”, but then the sellers moved in. Only a very late spurt saw the average close in positive territory.
With no economic data releases last night, early strength was put down to buying in anticipation of solid earnings result releases this week. Dow components Intel, IBM, Johnson & Johnson, General Electric, Bank of America and JP Morgan all report this week, along with non-Dows Citigroup, Goldman Sachs and Google. Clearly the focus is on the financial sector, and big things are expected of proprietary trading desks given moves in stocks, oil and gold, while M&A desks should have cleaned up on a recent burst of activity. It all depends, however, on how the results stack up compared to analyst expectations.
The approach to new intraday highs was nevertheless enough, it would appear, for the other side of the fence to take profits ahead of result season risk. It is noteworthy that the rally to date has had two distinct legs: the first spurred on by March quarter earnings, and the second by June quarter earnings. In each case analysts had become too bearish, after spending all of 2008 too bullish. How are they set for September? Can we go for Leg Three?
Markets elsewhere were also quiet, including in London where base metals closed mixed. The US dollar closed slightly weaker at 76.17 on the index, sending copper up 0.6% and aluminium, lead and zinc a couple of percent higher. Nickel and tin closed slightly lower.
The lower dollar was enough to keep action positive in gold market, inspiring a US$6.60 gain to US$1055.30/oz. The intraday spot price high nevertheless remains at US$1062.
Oil also put in a 2% gain, rising US$1.50 to US$73.27/bbl for a six-week high, but oil is still stuck in a several-month trading range. Inspiration last night came from an upgrade to global demand from the International Energy Agency on Friday, but analysts note the IEA has been behind other forecasters to date.
The Little Aussie Battler likes the air above 90 cents, rising a third of a cent from Friday to US$0.9069. This level seems to be comfortable now for a market expecting further RBA rate rises before year end, which leaves only another drop in the US dollar to provide further near-term impetus. After the unemployment shock, one wonders whether more positive economic data releases from here can make much of a difference alone.
The local stock market also appears poised for some new inspiration, which may well come from US earnings. The close yesterday of 4739 is short of last Thursday’s 4768, and a 19 point rise suggested by the SPI Overnight (0.4%) would not be enough just yet.
Today sees the release of the NAB monthly survey of business confidence.
You can’t move at the moment without bumping into Jamie Packer, with biographer Paul Barry soaking up the limelight in newspaper excerpts, radio interviews and last night’s Four Corners program, which must have been treading a thin line of advertising on the ABC. But it’s all absorbing stuff – just like any train crash.
Yesterday shares in Crown ((CWN)) leapt 6% on the news Packer had increased his stake in his beloved listed casino operation, seemingly almost in defiance of Four Corners’ portrayal of a man who had foolishly invested in US and Macau casinos last year at the top of the market. One can only muse that these were deals which would have seen Kerry as the seller, not the buyer (think Alan Bond). Talk is that Jamie is looking to take Crown private, particularly as Dad’s old nemesis Kerry Stokes made yet another raid on Consolidated Media ((CMJ)).
But Jamie and his coat-tail riders would not be too pleased with the news overnight that the Chinese government may move to limit the number of gaming tables in Macau and raise the minimum gambling age. US casino stocks fell 2-3% in response.
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