Daily Market Reports | Oct 15 2009
 By Greg Peel
The Dow rose 144 points or 1.5% last night to 10,015, reaching into five digits for the first time since it crashed through that barrier to the downside on October 4, 2008. The S&P gained 0.8% to 1092, suggesting the 1100 mark is near. The Nasdaq added 1.5%.
There was a lot of fanfare on Wall Street last night as the magic milestone was reached. The Dow bottomed on March 9, 2009, at a closing price of 6547 and an intraday low of 6440. The average has now retraced 46% of the drop from 14,087 on October 1, 2007. You have to go back to 2003 to find the last time the Dow rose through 10,000, and back to 1999 to find the first time the Dow rose through 10,000. In nominal terms, an investment in the 30 stocks of the Dow Jones Industrial Average is as good today as it was in 1999. In real (inflation-adjusted) terms – well let’s not go there.
The indices opened higher last night and continued higher to close almost at the highs of the day. After a boost from a solid Intel result, announced after the bell on Tuesday, Wall Street was excited even more by both the result from JP Morgan and the retail sales number for September.
JP Morgan Chase is widely considered to be the US commercial/investment bank least rattled by the GFC. It is the bank which, with Fed assistance, bailed out Bear Stearns in March 2008. It is also among the banks which received government (TARP) funding six months later. A quarter of solid rallies in the stock and commodities markets, and big moves in credit and foreign exchange markets, saw the investment banking business of JP Morgan surge. The company reported an earnings per share result of US82c against Wall Street expectation of US52c and compared to US9c in the same quarter one year ago.
The result was made even more remarkable by the fact JP Morgan doubled its provisions against consumer credit losses in the quarter. In other words, what JPM gained on Wall Street it fears it may lose on Main Street.
Which should have had alarm bells ringing. But then there was the September retail sales number. US retail sales fell 1.5% last month compared to a 2.2% gain in August. But August was all about “cash for clunkers” so if you take autos out of the number, September sales increased by 0.5% following a 1.0% gain in August and compared to economist expectations of a 0.2% rise.
Happy days are here again.
There is an expression on Wall Street which suggests “you can’t beat the tape”. This means you can argue all you like, but if the index is going up then the index is going up. If JP Morgan, and its fellow investment banks also reporting this week, could not make money out of last quarter’s financial market activity then they should give the game away. But back on Main Street, JPM has doubled its consumer credit provisions in one quarter, with accompanying ominous commentary, as Americans start buying again.
Unsurprisingly, the US dollar fell as Wall Street rose. The dollar index fell 0.6% to 75.48 to consolidate a 14-month low. This time however, gold was virtually unchanged at US$1062.80/oz.
Oil rose US$1.03 to US$75.18/bbl to mark its highest level since October last year.
Aluminium and tin were relatively steady, but lead nickel and zinc rose 1.5% and copper rose 2%.
The Aussie kept climbing, reaching US$0.9139.
The SPI Overnight was up 49 points or 1.0%. Add that to yesterday’s close in the physical and we will be having a look at 4900 today. The ASX 200 peaked at 6828 in November 2007 and fell to 3145 in March 2009. At 4986, the index will have made a 50% retracement.
I apologise for getting ahead of myself in yesterday’s Overnight Report. One must be careful crossing the International Date Line. It is tonight on Wall Street that we’ll see results from Citigroup, Goldman Sachs, Google and IBM.
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