Market wrap: Stocks look set to open in the red after a mixed night for resources and a mild pullback on overseas equity markets.
Wall Street weakened under flat housing data, mixed earnings reports and a sell-off in the energy sector after crude oil hit $80 a barrel but fell back. The Dow closed 0.5% lower, the S&P 500 lost 0.62% and the Nasdaq 0.59%.
New construction on U.S. housing was unchanged last month when analysts had predicted a rise in activity to confirm that an economic recovery is underway. Industrial giant Caterpillar beat third-quarter profit expectations by a wide margin by slashing costs but the news was less positive elsewhere. "Not everyone out there has been nearly so rosy," said an economist quoted on MarketWatch. "I also think that we're dealing with the fact that a lot of the good earnings news is already priced into this market."
An index of US precious metals miners dropped 2.15%. Also down were biotechs -2.91%, REITs -1.92%, oilers 0.66%. Financials were mixed, transport stocks rallied 0.78% and airlines were up 0.93%.
European markets also softened after Monday's flying start to the week. Britain's FTSE lost 0.72%, Germany's DAX 0.7% and France's CAC 0.54%.
Crude oil hit a one-year high at $80.05 a barrel for November delivery before recently falling back to $79.09, down 0.65% for the day. "It seems $80 was not so much a price as a destination," said a futures trader quoted on MarketWatch. "It was a cue for many bulls to take a profit."
Gold also retreated from yesterday's recent high as the weak housing data encouraged investors to switch out of stocks into US dollars, curbing gold's appeal as a hedge. The spot price was recently $1,055.30, down $8 on yesterday.
Base metals had a mixed night. Zinc inched to its highest level in 16 months and copper hit a one-year high but then wilted. In London, copper closed 1.16% lower, aluminium lost 1.8%, nickel 2.15% and tin 1.2%. Lead surged 3.68% and zinc gained 0.85%.
Futures traders expect some profit taking after yesterday's strong session. The SPI futures index closed 17 points lower at 4828.
TRADING THEMES TODAY
BOUNCE TRADES: Weak futures suggest opportunities today to pick up rising shares on pullback. Since March, any market dip has been a buying opportunity. That will eventually change but you gotta stick with what works for as long as it works. Standard chart support/resistance analysis is the basis for profitable trades. Buy shares in well-established uptrends when they pull back to support levels.
ECONOMIC NEWS: At 11 am, the Westpac Leading Index will provide a forecast of local economic growth for the next six to nine months. Last month's new car sales data are due at 11.30 am. In the US, the main interest is the release of the Federal Reserve's Beige Book analysing current economic conditions. Also out tonight: last week's mortgage applications.
