Daily Market Reports | Mar 25 2011
By Greg Peel
The Dow rose 84 points or 0.7% while the S&P gained 0.9% to 1309 and the Nasdaq added 1.4%.
What just happened? Nothing apparently. Wall Street has now completely discounted the Japanese earthquake, tsunami and nuclear scare in taking the S&P back over the psychological 1300 mark and back above the point at which it fell on the March 11 earthquake news. Next stop the February high marked ahead of the first MENA tip-over.
The nuclear scare in Japan no longer seems to be one, and although no one likes to admit it given the tragic loss of life and livelihood, markets are looking to the reconstruction boost to Japan's economy as being a net positive.
As for MENA, well when there's nothing new to report such factors tend to wane in influence. The coalition believes it has taken out Gaddafi's air force and the expectations have heightened that he will seek exile. Protesters continue to be killed in Syria and another large protest is planned for tonight in Yemen. Last night the West Texas oil price slipped US41c to US$105.34/bbl while Brent was steady at US$115.72/bbl.
As for Portugal, well the resignation of Prime Minister Socrates has led the markets to expect that Portugal will need to seek a bail-out. This would actually be good news given it removes Portugal from the list of uncertainties and there is plenty of money in the EU fund to cover the cost. Socrates is believed to be philosophical.
So all that should be something to worry about is not being worried about at present. The VIX last night fell 6% to 18, putting it into complacency territory, and traders are now talking of expectations of solid results at the next US quarterly reporting season which begins in less than two weeks. Hence last night's rally, albeit once again on light volume.
It must be noted with respect to volume, that the big swing factor on any day's total is the level of high frequency trading. HFT traders need intraday volatility to provide opportunity – whipsawing uncertainty and rollercoaster rides. When a market simply goes down several days in a row and then turns around and goes up several days in a row it is not really that volatile. During the GFC period 2008-09, HFT accounted for 50-70% of each day's trading.
After a big move up in commodities on Wednesday night, last night saw some profit-taking. Base metals were mixed on small moves, gold fell US$10.30 to US$1428.60/oz and silver was trimmed 0.6%.
But ya gotta love that Aussie, which pushed up once again by 0.6% to US$1.0209. One minute we were looking at perhaps a welcome pullback to 90, now we're back looking at the highs. The US dollar index slipped slightly to 75.70 as euro strength returned.
All of the above occurred despite a surprisingly week US durable goods orders result for February. Economists had expected a 1.5% increase in new orders, and 2.5% if you take out the lumpy transport component (planes etc). What they got was a 0.9% fall and a 0.6% fall ex-transport. It was the biggest drop in four months, and another sign that perhaps the US recovery is stalling somewhat, despite the Fed's suggestions otherwise.
The bond market paid attention, and bonds have been sold down in the stock market recovery rally anyway. Last night the ten-year yield rose six basis points to 3.41%.
The SPI Overnight gained 28 points or 0.6%. Yesterday the ASX 200 closed at 4699.60. On March 10 it closed at 4699.70.
Rudi will be a guest today on BoardroomRadio's Round Table at 3pm.
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