Daily Market Reports | Mar 20 2015
By Greg Peel
The Dow closed down 117 points or 0.7% while the S&P lost 0.6% to 2089 as the Nasdaq rose 0.2%.
Green on Screen
Yesterday’s 1.9% surge in the ASX200 can best be described as predictable. If we contrast the biggest sector gain, being the banks with 2.4%, to the smallest, being information technology which actually fell 0.3%, we can see the picture clearly. Info tech is not a yield sector. Banks are one of the best payers.
We can further look to the second biggest gainer, utilities, and the fact the materials sector rose 1.6% despite a three dollar drop in the iron ore price and subsequent sell-down in junior pure-plays. BHP and Rio pay dividends, and they drove the sector.
With the Fed now switching to a purely data-driven approach to policy, and recent US data being weaker rather than stronger with the sole exception of jobs, the first Fed rate rise is likely to be later rather than sooner. If the US GDP continues to disappoint, it may not be this year. That means interest rates remain low, and that means safe, high-yielding investments remain sought after, across the globe.
Yesterday’s close of 5950 was just shy of the early March closing high of 5958 but still a little short of the early March intraday high of 5996.
Wall Street Gets Fruity
After all this time, America’s biggest company by market capitalisation – Apple – has finally been included in the Dow Jones Industrial Average. Indeed, not so long ago Apple used to regularly spar with Exxon Mobil as the biggest company, but since the collapse in the oil price and the release of the latest round of Apple devices, Apple’s market cap is twice that of Exxon’s.
Yet in the anachronistic world of the Dow share price average, Apple comes in as the fifth most influential stock, after all the weightings are adjusted to account for the entry of the leviathan. Longstanding Dow component AT&T has been shown the door. Old world communication makes way for new.
As You Were
It was not an auspicious debut for Apple, picking a day when the Dow yet again moved by triple digits, yet again in the opposite direction to the day before. Indeed as is often the case, markets across the spectrum which moved spectacularly in the wake of the Fed statement release mostly returned from whence they came last night, at least to some extent.
Aside from US stocks falling back – although the Nasdaq did again kiss 5000 but once more failed to hold it – the US ten-year yield clawed back 3 basis points to 1.98%. Most notably, the US dollar index regained the 2% it lost on Wednesday night to be back at 99.27 this morning. If Janet Yellen thought she was helping out frustrated US exporters, it hasn’t quite worked out that way.
As a result, the Aussie is also back to where it was, falling 2% to US$0.7632. Glenn Stevens will be breathing a sigh.
The US dollar regaining its ground means the oil market is back to focusing on the oversupply issue, so West Texas fell US$1.07 to US$43.96 and Brent fell US$2.11 to US$54.35/bbl, to trim a bit over half of yesterday’s gains.
Metals
I noted yesterday that LME traders only had a moment to note that the word “patient” had been removed from the Fed statement before the bell rang, and would be red-faced after realising their misinterpretation of the Fed’s intent. But with the US dollar immediately bouncing back, one might assume there was no reason to scramble into base metals anyway.
Yet copper rose 2.2% in a session in which all metals rallied, although not quite as extensively as they fell the day before, other than copper.
The iron ore price is steady at US$54.50/t.
Gold is not fond of extensive bouts of volatility, preferring just to make sudden big moves every now and again. Thus while gold jumped twenty dollars on Wednesday night’s crunch in the US dollar, it has not fallen back on last night’s reversal. It’s steady at US$1171.30/oz.
Today
There’s nothing to suggest Bridge Street can’t hold onto yesterday’s gains today despite the pullback on Wall Street, other than yesterday saw a big move and some profit-taking might be encouraged, particularly on a Friday. The SPI Overnight closed down 11 points or 0.2%.
Glenn Stevens will be making a speech today at which I’m sure, if a Q&A is scheduled, he’ll be requested to speak to the Fed’s change of heart.
It’s the quadruple witching derivatives expiry in the US tonight which can often engender some volatility of its own.
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