Daily Market Reports | Sep 01 2010
By Greg Peel
The Dow closed up 4 points at 10,009 while the S&P was flat at 1049 and the Nasdaq fell 0.3%.
For once the volume on the NYSE looked almost healthy last night at 1.4bn shares compared to the usual 800m of recent weeks. But it was only because of end of month squaring. The reality is that volumes in August 2010 were 30% down on volumes in August 2009 which goes a long way to defining the current mood on Wall Street, which might be summed up as “suppose we gave a party and nobody came”. And the statistic dismisses any excuse of low volumes simply being a summer holiday phenomenon.
The other depressing statistic is that the fall of 4.7% in the S&P 500 over the month represents the worst August since 2001. However, there might just be a silver lining in this stat. There has been much talk, as there is every year, of September being statistically the worst month for stocks and October being the month for volatility. Could it be that we've had our “September” in August?
It's a nice thought, particularly given the market is polarised between those who believe another significant down-leg is inevitable, with S&P 950 a target, and those who believe we are very close to a bottom ahead of a serious rally. Indeed, one technical analyst appearing on CNBC said his models are suggesting either one or the other.
Thanks man. I'll stick with my trusty technical indicator – the coin.
Despite all the gloomy portents about September a simple fact remains: Wall Street has risen in five of the last six Septembers. See coin reference.
Last night on Wall Street was obviously impacted by end-of-month activity but there were a few data releases and the Fed minutes to absorb as well. The Dow was up about 60 points mid-session and down a bit near the close before that 10,000 level sucked the average in at the death. The 10,000 level seems to be the line in the sand for the above 50/50 bet, even though it's the S&P the market really focuses on. Take a look at this 5-day chart:
Note the reaction every time the average slips under 10,000. Note also the volume spikes at the open and close. Might as well just go to lunch at 10am and return at 3.45pm.
On the economic data front, the Case-Shiller 20-city home price index for June showed an increase of 1.0% month on month to mark its third consecutive rise. Year on year the number is plus 4.2%. This seems at odds with recent data, but note this is a June number which was still being impacted by the tax credits available when contracts were signed. Economists expect subsequent numbers to be negative.
The Conference Board monthly consumer confidence index showed a tick up to 53.5 from 51.0 last month, ahead of economist expectations of a flat result. This had Wall Street a bit excited, but when you consider a truly confident market means 90 on this index there's a bit of clutching at straws going on.
More in line with recent trends, the Chicago purchasing managers' index (PMI) fell from 62.3 in July to 56.7. Numbers above 50 nevertheless still mean expansion, and the result was also in line with expectation.
Armed with those data points, Wall Street put on a bit of a rally but couldn't hold it. Some reports blame the afternoon release of the Fed minutes for the failure but people with brains recognised that there was simply nothing new therein. The minutes of the meeting held before Bernanke spoke yesterday only supported what he said yesterday. The economy has to weaken “appreciably” before the Fed implements QE2. If it does, the first step will be to start buying mortgage securities again.
On the fiscal side of the stimulus equation, one point to note is that despite an understandable lack of fanfare, the War in Iraq is now officially over. There will be no VI-Day celebration in years to come (and besides, W. already did that several years ago), but outside of the loss of US souls the war has cost US$1.3 trillion over seven years. Obama is now able to reallocate defense budget funds, and clearly some means of job stimulus will be on the agenda.
Gold rose US$11.30 to US$1247.70/oz last night. Is this because the market is convinced the Fed will have to act, thus generating monetary inflation? Or is it simply a case that gold is now truly establishing its status as the one, the only, alternative currency to the US dollar reserve currency? No one wants the euro anymore, the yen is about to be reined in, and while the Swiss franc is also at multi-year highs it has never really been an alternative outside of illicit numbered accounts.
Gold rose despite the US dollar index treading water at 83.10 last night, while the Aussie drifted slightly to US$0.8907.
Where did traders want to be at the end of the month? Not in oil, that's for sure. Oil fell 3.7% to US$71.92/bbl even as Hurricane Earl threatened to attack the Atlantic coast. Earl is not a Gulf hurricane, so there's no fear of impacting on production, but Earl is reminding us that the hurricane season is now beginning in earnest.
Base metals returned from their lay-off last night and over a two-day stretch did little. On average they fell around 1%, although tin was down 3%.
The bond market was also impacted by month-end last night, given funds typically buy bonds on the last day to stay in line with benchmark indices. The ten-year yield fell 6 basis points to 2.47%.
The SPI Overnight was somewhat of a surprise, leading this correspondent to wonder if there was something he'd missed. The SPI rose 41 points or 0.9% which may be a reflection of the fact the ASX 200 did take too much of a tumble yesterday, or of positive expectations for today's Australian GDP release, or of positive expectations for today's Chinese manufacturing PMI release. We'll have to wait for the opening bell.
Welcome to September. The results season is over and we kick off today with said local June quarter GDP and the monthly round of manufacturing PMI data from across the globe. Tonight in the US also sees the ADP private sector jobs number ahead of the official number on Friday.
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