Daily Market Reports | Nov 21 2009
By Andrew Nelson
The Dow closed 13 points or 0.13% lower, while the S&P 500 gave up 0.3% and the tech heavy Nasdaq retreated 0.5%.
Stocks were in the red for most of the session, but an afternoon push threatened to cement a positive close before some last minute selling pulled the Dow back below the gain line in fairly thin trade. The loss made it three straight closes in the red, with investors remaining concerned about the economy, while the energy and technology sectors took a hit from a broker downgrade and some very disappointing numbers from Dell.
But the biggest story of the week has undoubtedly been the stabilisation of the US dollar and the subsequent stall of the equities market as investors looked to dump stocks in favour of the greenback and Treasuries. The generally accepted belief that the Fed will keep interest rates near zero well into 2010 kept pressure on the US dollar earlier in the week, helping to lift the major stock indexes to fresh 13-month highs. But the flow of cheap money now seems to be going into other assets and shares have suffered.
The greenback posted gains against the Aussie, euro and most other foreign currencies finding strength in the fact that the European Central Bank has taken its first unsteady step toward unwinding stimulus measures. In a surprise announcement, the central bank said it would look to tighten some of the standards that it uses to accept newly issued asset-backed securities as collateral from banks.
The US dollar ended up positing its first weekly gain in three weeks versus higher-yielding currencies like the Aussie, NZD and pound, but this has come at the price of a week’s worth of official commentary and economic data that has taken a toll on expectations of a strong rebound from the US recession. For more detail on the US GDP outlook see yesterday’s Overnight Report.
Unsurprisingly, the dollar’s gains have continued to weigh on commodities, with crude oil dropping for a second straight day. Crude for December delivery, which expired today, gave up US74c, or about 1%, to US$76.72 a barrel. However, the contract ended the week up 0.5% on the back of a decent winning streak from Monday through Wednesday.
Gold continued to shrug of a firming US dollar, rising for a sixth straight session to book its third weekly gain. The gold price advanced US$5.40 to $1,150 as continued concerns over a generally weakening trend in the US dollar and fears about the possibility of global inflation keeps spurring on investors to buy gold as a safe asset.
The base metals complex also looked past a stabilising greenback, climbing back from intraday lows to finish the week on a fairly firm footing as investor interest continued to return to metals. All of the base metals except nickel finished the day in positive territory. The week saw copper hit its highest level in over a year, while aluminium, tin, lead and zinc weren’t far behind.
In stocks, tech shares weighed on the day after PC giant Dell reported a big drop in quarterly profit late Thursday that missed expectation by miles. Shares fell 10% today. Not helping matters was news that analysts at Bank of America Merrill Lynch downgraded the semiconductor industry.
Home builder stocks were also down after D.R. Horton posted a bigger than expected quarterly loss and said conditions in the industry remain challenging. The report followed on the heels of yesterday’s fall in housing starts and news that US foreclosures were at a record high with no signs of help in sight.
Major European indices also closed lower, with the CAC-40 in Paris falling 0.8%, while Asian shares retreated yesterday.
Australian overnight trading offered little hope for a good start on Monday, with the SPI losing 7 points to 4694 overnight.
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