Daily Market Reports | Mar 29 2011
By Greg Peel
The Dow closed down 22 points or 0.2% while the S&P lost 0.3% and the Nasdaq dropped 0.5%.
Wall Street rose to be up around 50 points in the Dow early in the session and remained positive until right at the death, when a large swathe of “sell on close” orders were taken. Talk on the floor last night was not of the movement of the indices however, but of the almost non-existent trading volume. At 258m share turnover on the NYSE, it was the lowest volume week since the last week of 2010 – that is, the week between Christmas and New Year when nobody's there.
It is one thing to suggest that a lack of up-down-up-down volatility of late has kept high frequency traders in their box, but volume of this size indicates a complete lack of interest. At the the very least, there is a complete lack of conviction. Perhaps we can dissect the cause.
The nuclear situation in Japan seems stable one minute and not so the next, with outsiders now lacking confidence in the Tokyo Electric Power Company and government officials in terms of their competence and information dissemination. Libyan rebel forces now seem to have the upper hand, but what of Syria, Bahrain and, most importantly, Saudi Arabia? Portugal is probably going to have to be bailed out, and that's not causing much angst. Why not?
In other words, geopolitical factors are dominant at present, and also unclear – enough to keep players on the sideline. Then the next problem is contradictory talk in the US on monetary policy, with one Fed member saying rate rise, PIMCO warning of a bond collapse when QE2 ends, others talking of QE3, and no one knowing at all what Bernanke is thinking. It is QE2 which has brought US stock indices to this point. What happens without it?
Last night's US economic data were a little better. Having fallen 2.8% the month before, pending home sales rose 2.1% in February to be 8.2% below the level of last year. This is the first piece of positive housing data for some time.
Personal incomes rose by 0.3% in February having risen 1.2% in January. Personal spending rose 0.7% to mark its biggest gain for some time, and the first in ages when spending has outpaced income. But the problem is, it's all down to rising gasoline prices, along with food prices. The implicit inflation gauge derived from this set of data, as distinct from the typical CPI measure, showed a 0.4% jump in headline inflation – the highest in two and a half years. Core inflation rose 0.2%.
The US dollar index was little changed at 76.17 last night and the Aussie was also hanging around its multi-decade high at US$1.0254 – a factor which had commodity stocks weakening on the local bourse yesterday. They won't be much better off today following a fall in commodity prices overnight.
The situation in Japan now seems to be drawing out interminably, thus setting back any V-bounce response in terms of commodities demand. That's the way traders saw it in London last night as all metals were sold down 1-3%. There was also bad news for uranium stocks last night given the loss of a German State election by Angela Merkel's party – the election being won by a party with an anti-nuclear stance.
There was a sizeable drop in West Texas crude last night – down US$1.62 to US$103.78/bbl, albeit Brent only fell US79c to US$114.80/bbl. Oil is stuck in a range at present as, again, the picture is unclear as to what will transpire. Last night's falls reflected the Libyan rebels' re-taking of coastal oil ports.
Gold fell US$8.10 to US$1420.40/oz last night and silver was also trimmed.
The SPI Overnight rose 4 points.
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