The Monday Report (on Tuesday)

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            [3] => ((ORG))
            [4] => ((ERA))
            [5] => ((WES))
            [6] => ((WOW))
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            [1] => ROC
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This story features ROCKETBOOTS LIMITED, and other companies.
For more info SHARE ANALYSIS: ROC

By Greg Peel

Friday's session on Wall Street was a simple case of “more of the same”. The Dow added another 70 points, or 0.5%, to close the gap to the 2007 peak to 270 points. The S&P rose 0.5% to close at 1502 – its first close above that level since 2007. Friday marked the eighth consecutive up-day for the broad market index – a run not achieved since 2004 (nine days).

The Nasdaq also had a solid session, rising 0.6%. The tech-laden index long ago passed its 2007 peak, but is still well below its own all-time highs of the dotcom bubble. Apple slid another 2% on Friday following Thursday's 12% ravaging, and is now down over 37% from its 2012 all-time high. In trading lower on Friday, Apple finally lost its “biggest company” mantle to previous long-time number one Exxon.

Dow component Procter & Gamble provided the earnings result highlight of the session, maintaining the trend of well-received reports. By Friday, 179 S&P 500 stocks had reported (29%) with 68% beating estimates and 18% missing.

The economic data release highlight of the session was not much of a highlight at all, with US new home sales falling 7.3% in December from November. The trend remains positive nevertheless, with sales up 8.5% in the twelve months to December, however once again we see signs of rising house prices offset by still strict bank lending policies impacting on potential sales. Wall Street clearly decided the weak monthly result was not enough to derail the enthusiasm.

Remember the euro? It was in focus on Friday as European banks paid back a big slice of the ECB's cheap-loan LTRO handouts. This sent the euro higher, aided by another unexpectedly solid result for Germany's IFO business climate index. Unfortunately for the eurozone, the euro is beginning to suffer Aussie-like problems given the ECB is yet to let slip the dogs of currency war and join in the global printing frenzy. In theory, Spain has to stick its hand up for a bailout for this to happen. In the meantime, the last thing the eurozone needs is a too-strong currency in the face of little or no net economic growth.

Euro strength helped the US dollar index fall 0.2% on Friday to 79.74, however this did not deter the safe havens of gold and the Aussie from falling US$10.40 to US$1658.70/oz and 0.3% to US$1.0425 respectively, reflecting the improving global risk appetite. And on the subject of safe havens, the benchmark US ten-year bond yield rose 10 basis points on Friday to 1.95% to reflect the LTRO repayments.

Base metals were once again mixed on small moves, while the oils were little changed. The SPI Overnight showed a level of excitement, however, in rising 31 points or 0.6%.

Monday night's session was one of consolidation. The Dow was down 33 points early on before attempting to recover into the black, finally closing down 14 points or 0.1%. The S&P tried to match the 2004 nine-day gain, but fell short on the death, closing down 0.2% to 1500 – a level which it is assumed will require some work. The Nasdaq managed to close up 0.2%. Mixed economic data and a lack of major earnings surprises ensured a more subdued session.

US new durable goods orders rose a better than expected 4.6% in December, pumped up by a chunk of orders for military and commercial aircraft. Take out the lumpy and volatile transport segment and orders rose 1.3% against the 12-month average of 2.2%. Wall Street was nevertheless pleased with the result.

Pending home sales, however, unexpectedly fell 4.3% in December after three consecutive months of gains. This news was not so well received by Wall Street, but realtors insist that the issue is not a lack of buyers but a lack of suitable inventory for those buyers to snap up. The US housing market has been on the mend and sellers are now reluctant to miss out on potential gains. Taking a snapshot from both housing data sets released over the past two sessions, we might conclude the US housing recovery is reaching a point at which it may consolidate before, it is assumed, resuming its recovery trend.

Dow component Caterpillar provided the earnings release highlight in the session, and while not setting the world on fire, the result was enough to affect a slight gain in the Caterpillar share price.

The US dollar index was slightly higher last night at 79.78 as the Aussie fell another 0.1% to US$1.0415 and gold fell US$4.50 to US$1654.20/oz. The US ten-year bond yield ticked up another 2bps to 1.97% to spark talk of just what psychological impact a return to 2% might invoke. A trigger to buy stocks? There is a growing opinion US stocks may just need a bit of a cool-off from here before they might push higher again.

After the bell, Yahoo posted a well received result which has its shares up 4% in the after-market. The SPI Overnight fell 3 points to net a 28 point gain over two sessions.

It's a significant week in the US this week for economic data. Tonight brings the Case-Shiller house price index along with consumer confidence, but Wednesday is the biggie, featuring the ADP private sector jobs report for January along with a Fed monetary policy meeting and subsequent statement and the first estimate of December quarter GDP. Economists expect this first guess to come in at 1.2% following the September quarter's 3.1% (annualised) gain.

The week will wrap up on Thursday with personal income and spending and the Chicago PMI, and Friday with vehicle sales, the January manufacturing PMI and the January non-farm payrolls number.

Friday, being the first of the month, is global manufacturing PMI day hence reports will also flow from the UK, eurozone, China and Australia. During the week, Australia will see the monthly NAB business confidence survey today and private sector credit on Thursday.

Things will begin to hot up on the local stock front this week as resource sector quarterly production reports wind down and the first reports of the six month company result season trickle in. Production report highlights this week include Beach Energy ((BPT)) and Oil Search ((OSH)) today, Panoramic ((PAN)) and Roc Oil ((ROC)) tomorrow, and AWE ((AWE)) and Origin Energy ((ORG)) on Thursday.

Energy Resources of Australia ((ERA)) and Westfield Retail Trust ((WRT)) will provide their full-year results on Thursday, while Wesfarmers ((WES)) will report quarterly sales numbers on Wednesday and Woolworths ((WOW)) on Thursday. Tomorrow Pharmaxis ((PXS)) will be hoping to gain a product approval from the US health authorities.

Rudi will appear on Sky Business on Thursday at noon and again at 7-8pm for the Switzer Report.

For further global economic release dates and local company events please refer to the FNArena Calendar.

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