Daily Market Reports | Apr 14 2010
By Greg Peel
The Dow closed up 13 points or 0.1% while the S&P rose 0.1% to 1197 and the Nasdaq added 0.3%.
The Dow was down as many as 58 points early in last night's session as the market absorbed what had been a disappointing result from Alcoa after the bell on Monday. Alcoa's miss on revenue expectations cast somewhat of a pall over what is expected to be a bumper earnings season. But Alcoa is only the first result, and Wall Street recovered in another attempt to take the S&P 500 to 1200.
Once again the S&P hit 1199 and once again it fell back.
China released some surprise data in yesterday's session, showing the first monthly trade deficit since 2004. The deficit was caused by a 66% surge in imports in March, which is remarkable for one of the world's biggest export nations. But the result was not specifically about weak demand for China's exports.
In recent months there has been a strong rise in inter-Asian trade. China has not only been sucking up imports to support its infrastructure binge, it has in recent years outsourced some of its own manufacturing base to smaller Asian nations such as Vietnam, just as America decided early this century to outsource to China. Therefore a proportion of those imports will be converted into exports in later months. But importantly, there are clear signs China's domestic consumption is on the rise, and goods from neighbouring exporters are popular. This is healthy.
The US last night released its February trade balance, meaning its trade data run one month behind the efficient Chinese. The US trade deficit blew out once more as American consumers also picked up their pace of spending. It was not just oil this time, but genuine demand for foreign products.
Interestingly, within that number imports from China were at the lowest level since May 2009. Between lower US demand for Chinese products and China's first trade deficit in six years America is losing leverage on its insistence China must revalue its currency immediately. But economists consider the Chinese deficit is more likely a timing blip that will quickly reverse. And as for the Americans, well stronger consumer demand for imports is a positive sign for the economy but not for reducing the overall deficit.
A first real test of the Greek rescue package – the package is still on stand-by yet to be exploited – came last night when the Greek government auctioned 1.5bn euros worth of six-month and one-year Treasury bills into the market. Clearly that stand-by package is seen as somewhat of a free put option, given the auction was more than seven times oversubscribed. The bills were sold at yields representing 50 basis points below the prevailing market rates for each maturity.
On that news the euro rallied once more to move over the US$1.36 mark. The US dollar index slipped slightly to 80.46.
Base metal markets were mixed with copper jumping 1% and aluminium 1.5% and nickel taking a breather for a change. The major metals are pushing through new recent highs but are not quite displaying the momentum to really charge ahead. The US$8000/t level remains a formidable barrier for copper.
The further easing of Greek fears saw gold down US$4.90 to US$1151.10. The sharp rally in gold from US$1100 to US$1160 recently was all about European buying, as traders sold the euro and switched into gold ahead of whatever disaster was set to befall Greece. Some of those trades are now being unwound.
Oil can't take a trick at the moment and fell another US29c to US$84.05/bbl. Traders cite expectation the latest data will show further inventory builds but expectations are rarely on the mark. More influential is a general feeling oil became just a bit too carried away recently and that prices over the US$80 mark are likely to spark production increases from OPEC.
The Aussie regained some ground on the weaker US dollar, rising a quarter of a cent to US$0.9287.
The SPI Overnight jumped 21 points or 0.4%.
It must be noted that at this time of the year (Australia off summer time and the US on it) the SPI Overnight closes at 7am which is one hour after the close on the NYSE. This is important right now because it means the SPI can react to US earnings results posted after the closing bell, which a lot of them are. Last night it was Intel's turn.
If I recall correctly, Intel has made a habit of beating Street estimates in recent quarters and last night was no exception. Indeed, commentators were gushing over a result that not only marked earnings of US43cps versus US38c consensus, and revenue of US$10.3bn versus US$9.8bn consensus, but featured a big increase in margins, upgraded guidance and news that Intel would begin hiring again after several quarters of lay-offs.
This is exactly the sort of positive earnings surprise Wall Street is hanging out for. Intel shares, which have already had a good run lately, are up 3.5% in the after-market and, all things being equal, the Dow-component should spark a positive session tonight and perhaps help the S&P across the 1200 mark.
The “things” that may make a difference tonight include releases for US retail sales, business inventories and the monthly CPI. The Fed releases its Beige Book and Ben Bernanke provides his thoughts as he wraps his two-day mandatory testimony to Congress.
Australia learns the latest consumer confidence data from Westpac today.
[Note: All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.]
