Daytrading March 5 pre-market

Morning traders. Thanks Shants and after-market regulars.

Market wrap:

Stocks look set for a flat start after US stocks declined for a second session amid caution over valuations ahead of tomorrow's US jobs report.

The March SPI 200 futures contract slid one point or less than 0.1% to 5882 as Wall Street halved its initial loss.

The S&P 500 dived as much as 20 points in early trade before closing nine points or 0.44% lower as traders continued to take profits with share-price valuations near five-year highs following Monday's record close. The Dow lost 106 points or 0.58% and the Nasdaq 13 points or 0.26%.

“The market is vulnerable to some sort of short-term decline, primarily because valuations are stretched,” Dan Morris, global investment strategist at TIAA-CREF Asset Management in the US, told Bloomberg. “It’s hard to find inexpensive parts of the market.”

With a current P/E ratio of 18.9, the S&P 500 index is trading well above the 80-year average of 16.9. The index recorded its best monthly return in three and a half years during February, rising 5.5%.

The market plunged at the open after a private-sector employment report showed hiring slowed last month, raising questions about the outlook for Friday's official government data. Last night's ADP report had jobs gains falling to 212,000 last month from an upwardly revised 250,000 in January. However, the jobs market faced several headwinds during the month, including bad winter weather, lay-offs across the energy sector and a port strike on the west coast.

"The headline number was below expectations, but with revisions for January, it was still a good report," Canally told MarketWatch.

A separate report showed services activity accelerated. The Institute for Supply Management’s non-manufacturing index rose to 56.9 from 56.7 in January, ahead of the 56.5 reading anticipated by economists.

BHP and Rio Tinto remained under pressure in US trade as iron ore continued its gentle decline, falling for the fifth time in six sessions. BHP lost 0.74% and Rio Tinto 1.95% in US trade. Spot iron ore for import to China yesterday dropped 20 cents to US$62.10 a dry tonne.

US oil turned higher after Saudi Arabia announced it will raise its selling price next month. Saudi Oil Minister Ali al-Naimi said demand was rising and the oil price was stabilising. West Texas Intermediate crude oil for delivery in April settled $1.01 or 2% ahead at US$51.53 a barrel. However, April Brent crude settled in the red at US$60.55 a barrel, down 47 cents or 0.8%.

A rising US dollar helped drive gold lower for a third session. Gold for April delivery declined $3.50 or 0.3% to settle at US$1,200.90 an ounce. The NYSE Arca Gold Bugs index retreated 1.71%.

Nickel rebounded from a 14-month low following reports that the Chinese government is closing some nickel pig iron operations for environmental reasons. In London, nickel rallied 2% copper 0.3%, aluminium 0.5% and lead 1.5%. Tin fell 0.1% and zinc 0.15%. US copper for March delivery was recently up 0.2% or two-thirds of a cent at US$2.68 a pound.

European shares regained most of Tuesday's loss as fresh data underlined improvements in the euro-zone economy. Retail sales increased by 1.1% during January, almost three times as much as analysts expected. A gauge of business activity was revised downwards to a final reading of 53.3 last month from an initial take of 53.5, but continued to reflect expanding activity. The Stoxx Europe 600 bounced 0.76% as Germany's DAX added 0.97%, France's CAC 0.98% and Britain's FTSE 0.43%.

The dollar was this morning buying 78.23 US cents.

TRADING THEMES TODAY

CONSOLIDATION CONTINUES: Global markets ran hard last month and need a few days/weeks to digest the gains. A partial retrace appears the likeliest outcome, although tomorrow night's US jobs report and tonight's ECB meeting are wildcards that could change the outlook. Oil seems to be building a base at current levels. Iron ore remains soft. Elevated volatility on the ASX continues to offer excellent intraday trading opportunities. Good times.   

ECONOMIC NEWS: January trade and retail sales data are due at 11.30am EST. RBA Deputy Governor Phil Lowe is due to address the Goldman Sachs Annual Global Macroeconomics Conference in Sydney from 12.30pm. The European Central Bank releases a policy statement tonight following its monthly meeting. US highlights are weekly benefit claims, revised non-farm productivity and unit labour costs, and factory orders.

Good luck to all.