Daily Market Reports | Dec 13 2011
By Rudi Filapek-Vandyck
The Dow finished today's session 162.87 points, or 1.3% lower, at 12021.39, wiping out most of the gains in the summit's immediate wake on Friday. The Standard & Poor's 500-stock index shed 18.72 points, or 1.5%, to 1236.47, and the technology-oriented Nasdaq Composite slid 34.59 points, or 1.3%, to 2612.26.
"When the market speaks, only the foolish do not listen".
Investors who are still trying to squeeze a profit out of the financial markets two weeks ahead of Xmas better take note of Dennis Gartman's warning in today's newsletter, The Gartman Letter. Up until today's session on Wall Street, Gartman, like so many others, had been cautiously positive on short term prospects for US equities as well as for gold. All that has now changed.
Hence the warning that also opens today's Overnight Report.
After an initial positive reception of the latest European deal, financial markets swiftly reversed course on Tuesday. As I stare at various tables provided by the Wall Street Journal, it is difficult to think in terms other than "bloodbath" or "a sea of red". The good news is: it all looked much worse during the day, with most indices in the US ending Monday's session substantially off their lows.
The bad news is that technical support levels were breached during the process, which probably indicates today's reversal is not just a one-off. Note: the Chinese market also fell through an important technical support yesterday. In today's session the S&P 500 immediately opened below 1245, which is supposedly the level that would keep underlying sentiment positive. Then it fell further after a brief consolidation. The gauge did, however, reduce losses towards the end of the session.
Weakness was across the board, all-pervasive and persistent.
US bond yields fell. The10-yrs were down 4bps to 1.02% and the 2-yrs were steady at 0.22%. WTI oil fell 1.4% to US$98.04/bbl (Jan futures). Brent futures fell 1.3% to US$107.26/bbl. LME base metals dropped 2.4%, copper lost 2.7%. Gold fell 2.8% to US$1669/oz. Cotton fell 3.6%. The euro came under pressure in FX markets, sinking to a 2½ month low against a resurgent USD, while the AUD was pushed back to US$1.0050.
Prior to Wall Street's opening, equities in Frankfurt plummeted 3.4%, Paris shed 2.6% and London dropped 1.8%.
Eye-catching, to say the least, is gold's bad fortune when everything risky is having a hard time. This puts some serious question marks around gold's safe haven status at a time when the European Central Bank is not following in the QE footsteps of its peers in London and New York. Dennis Gartman's warning was specifically meant for investors in gold, with today's warning coinciding with the observation that gold priced in euro has now fallen below a well-defined trend-line.
Gartman warns these are not the sort of market signals astute investors should cast aside.
As for what exactly caused today's all-abundant risk aversion, one could point at warning statements by rating agencies Moody's and Fitch. Both clearly remain unimpressed by developments in Europe. But… there was also a sudden profit warning by leading global chip manufacturer Intel, putting a big question mark around the usual hope the US will stand on its own when everything else is faltering.
Economic data around the world are now disappointing; from China to Korea, to Brazil and to India, including Australia. Note also the OECD leading indicator is back in negative territory, including the US read, which suggests 2012 is looking a lot worse than where we are in late 2011. At least from the perspective of economic growth.
SPI futures in Australia are indicating a risk-off day today, suggesting 79 points or 1.9% down to 4181.
Investors should pay close attention to the release of the NAB survey. Today's FOMC meeting is not expected to deliver the next round of QE, but various experts believe the next meeting in January might.
Greg Peel is on holidays.
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