Daily Market Reports | Mar 27 2013
By Greg Peel
The Dow rose 111 points, or 0.8%, while the S&P gained 0.8% to 1563 (2 points shy) and the Nasdaq added 0.5%.
Tomorrow in Australia and tomorrow night in the US represent the last trading day of the month and the last trading day of what has been a very strong quarter. Perhaps, in Wall Street’s case, this can explain why the Dow put in another triple-digit move to the upside when there was little impetus for it to do so. Or maybe we are just in a bull market.
It was nevertheless noticeable that while the Dow moved into what is further blue sky last night, the S&P 500 could still not manage to breach its own all-time high of 1565. Every time it gets close, it fails. If fund managers are making one last push to the end of the quarter to boost their numbers on paper then tomorrow night might be interesting if a bit of profit-taking after an extraordinary quarter, and ahead of the long weekend, appears.
After Mr Dijsselbloem’s foot in mouth disease exercise on Monday night authorities in Cyprus felt it prudent to keep all Cypriot banks closed until Thursday. Originally only Laiki Bank and the Bank of Cyprus, which are involved in the good/bad merger, were to remain closed until Thursday and other banks were set to open last night. Fearing a run, it was decided they best stay closed. Mr Dijsselbloem may have since qualified his poorly thought out comments, but realistically the ship has sailed. Two days will not make much difference, one assumes.
Either way, nothing happened in Europe last night so Wall Street had no distractions. Traders also had a raft of economic data releases to seemingly ignore.
The Case-Shiller house price index for January showed a 0.1% increase to the highest level since September 2010, to mark 8.1% year on year growth, which is the highest growth rate since June 2006. That was the good news.
Sales of new homes in February fell 4.6% to mark the biggest monthly drop in two years. I have been arguing for a while now that the two above data points are related – as prices rise the number of sales is easing given sellers have become more cocky with their price expectations – and also that banks are still reluctant to lend to anyone other than the most credit worthy of borrowers having failed to yet ease their post-GFC panic restrictions. There was another factor in February nevertheless, being lots of heavy, unseasonable snow.
New durable goods orders rose 5.7% in February, but if we take out some lumpy orders for aircraft, non-transport orders fell 0.5%. That’s the first decline in six months.
March is the month in which the sequester budget cuts came into force and while Wall Street managed to shrug them off, Main Street did not. The Conference Board’s measure of consumer confidence this month plunged to 59.7 from 68.0 in February. Consumer confidence peaked late last year in the seventies, took a hit in January with the payroll tax hikes (another fiscal cliff component), and has been dropping ever since.
The Richmond Fed manufacturing index has fallen to a reading of plus 3 this month from plus 6 last month.
Woohoo! Let’s buy.
One might also argue that while it seems strange Wall Street should put in solid gains in a session featuring weak domestic data and a lingering European shadow, strong US data make traders nervous as the Fed might be forced to withdraw stimulus sooner rather than later. A little weakness along the way keeps Uncle Ben firmly locked in, they muse.
The euro is still floundering on the downside, but the US dollar index remained steady last night at 82.88 given the rest of the world saw the US data as weak. The Aussie is 0.3% higher at US$1.0487, while gold continues to drift back, falling US$4.30 to US$1600.60/oz.
London metals traders saw the US data for what they were, and subsequently sold down aluminium, nickel and tin by around 1% and lead by 2%. Copper was slightly weaker. On the other hand, the oil market does not dismiss the lumpy aircraft orders from the US durable goods numbers, obviously, so it saw good news and pushed Brent up US$1.41 to US$109.36/bbl and West Texas up US$1.51 to US$96.32/bbl. Spot iron ore rose US$1.10 to US$137.10/t.
The SPI Overnight closed up 9 points.
It’s March quarter stock option expiry day today on the ASX and there are reportedly some rather large open positions around the money in some of the larger cap stocks. Don’t be surprised, thus, if your favourite stock does some seemingly strange things today as the option holders and option writers battle it out to the close.
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