Daily Market Reports | Mar 05 2010
By Greg Peel
The Dow rose 47 points or 0.5% to 10,444 and thus back into the positive for 2010. The S&P gained 0.4% to 1122 and the Nasdaq added 0.5%.
While the most you might get at home from a teenager is a grunt or some petulant backchat, fortunately for the US retail sector teenagers are far more accommodating when they enter stores servicing their particular needs. Indifferent to financial fears of their parents' generation, teens have remained a major buying force and a saving grace for retail sales this past year because when teens want something, like, they just really want something.
This theme was again played out last night as major US retail chains announced their same-store sales numbers for February, the strength of which took Wall Street by surprise and sent shares in more youth-oriented chains flying. Net sales rose 4.1% (Bloomberg) to mark the highest monthly gain since November 2007.
Back in the real world, pending home sales fell a surprisingly steep 7.6% in January on a seasonally adjusted basis. While snow once again came up as an excuse, the fact remains all recent housing data have been pretty poor and not just in January, despite an apparent slowing decline in prices. Pending home sales are an indicator to results in actual home sales in one or two months hence.
Factory orders rose 1.7% in January, but economists had expected 2.5%. The factory orders figure combines orders for durable goods (individually released last week) and non-durable (consumable) goods. Last week's 3.0% gain in durable goods orders was revised down to 2.6% in this figure, and that number was already blown out by some lumpy aircraft orders. Fuel was a big part of non-durable.
Some observers have been wondering how the US can post a fourth quarter GDP growth figure of 5.9% when unemployment grew to 10% in the same quarter, but part of the answer was last night's release of the quarterly productivity numbers. Hours worked fell 1.3% as output was increased 2.5%, resulting in a huge 6.9% (annualised) productivity increase.
It seems US workers tend to knuckle down when the boss is deciding who next to let go.
Along with some broker upgrades to Buy of a couple of Dow components last night, the above figures were enough to drive the Dow into positive territory for the year and the S&P 500 through its 1120 Fibonacci resistance. But volume was thin as traders await tonight's jobs numbers. Weekly new jobless claims showed a slight drop last night which was at least comforting after two weeks of surprise jumps. Consensus has unemployment moving from 9.7% to 9.8% but the snow factor is just too much of a wildcard to be certain.
It was all happening across the pond last night as well.
The market and the Greek government held its breath as the previously postponed auction of 5 billion euros worth of sovereign five-year bonds went ahead. There was a sigh of relief when 20 billion euros worth were sought, although at 6.3% yield it's not so surprising. The equivalent German bond is yielding near 300 basis points less yet the two countries share a common currency. And the common currency explains why Germany needs to bail out Greece.
It is likely Greek bonds were well bid given speculation earlier in the week that German and French state-owned banks were going to prop up Greek debt, but last night such rumours were yet again denied, this time by the French finance minister. Who can know what's going on.
Last night the European Union confirmed the previous estimate of only 0.1% GDP growth for both the EU (27 nations) and eurozone (16 nations). The ECB unsurprisingly left its cash rate on hold at 1.0%.
The Bank of England also unsurprisingly kept its cash rate on hold at 0.5% and did not announce a return to increased quantitative easing. The latter was not too much of a surprise either, but governor Mervyn King has maintained that the BoE will jump back in to support credit markets at the first sign of deterioration.
Both King and the ECB's Trichet were more downbeat than upbeat about economic prospects in their respective reports however, leading the market to buy US dollars in favour of euros and pounds. The dollar index rose 0.75% to 80.57.
This was enough to nip this week's sharp commodity price rebound in the bud. Gold fell US$7.80 to US$1131.60/oz while base metals all fell 0.5-2.0% with the exception of a steadier aluminium.
Oil fell US66c but managed to stay above the US$80 level at US$80.21/bbl. Much has been made of benchmark natural gas prices recently, given they remain weak despite the severe snow storms. Withdrawals of natural gas last week were not as high as analysts had expected despite the cold, sending the price down 4% last night. The problem is the US has had a lot of gas stockpiled.
Weak gas prices do not help Australian LNG hopefuls trying to secure stand-out long term supply contracts.
The Aussie slipped back half a cent on the stronger greenback to US$0.8999 while the SPI Overnight gained 21 points or 0.4%.
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