daytrade diaries... february 4

Morning traders.

Market wrap: Australian stocks are set to open lower this morning after overseas markets stuttered overnight and a charging U.S. dollar undermined commodity prices.

Futures traders expect our market to open 27 points lower after a mixed night on Wall Street, modest losses in Europe and some heavy hits to industrial metals. The March SPI futures contract closed at 4580.

The S&P 500 dropped 0.55% after a weak earnings outlook from pharmaceutical giant Pfizer dragged down the health care sector and stymied Wall Street's best two-day run in three months. The Dow dropped 0.26% while the Nasdaq fared best, closing near-flat at +0.04%.

Analysts said this U.S. earnings season has delivered improved bottom lines but not enough evidence of increased sales to confirm that the economy is recovering swiftly. The S&P 500 is down about 4% since Alcoa's early-January report marked the start of the Q4 reporting season.

"Only about 30% of companies are reporting revenue increases, which bothers us," the managing partner at a portfolio-management firm told MarketWatch. "That's part of the reason we're in no man's land for the market right now."

The overnight economic news was mixed. There was a smaller-than-expected drop in private-sector jobs - the smallest since February 2008 - but a measure of service-sector activity came in below expectations.

Financial stocks were hit hard. The S&P Bank Index slumped 2.3%. Airlines were down 2.6%, transport stocks 1.9%, REITs 1.7% and most resource sectors around 1%. Tech stocks and telecoms bucked the downtrend.

The upbeat jobs figures and ongoing concerns about European debt problems relit a fire under the U.S. dollar and drove the dollar index back towards six-month highs. The index, which tracks the greenback against a basket of currencies, was recently up 0.47%.

The price of gold fell for the first time in three sessions. The spot price was recently trading at $1,108.50 an ounce, down $5 or about 0.5% for the session.

A smaller-than-expected rise in U.S. crude stockpiles couldn't keep the price of crude in positive territory after a two-day rally that had seen the price climb $4 a barrel. Overnight crude futures were recently trading 0.4% lower at $76.92 a barrel.

Industrial metals were back under pressure after this week's brief selling pause. Copper touched a fresh two-and-a-half month low in London as the prospect of a slowdown in Chinese growth continued to spook traders. In London, copper slipped 4.2%, aluminium 2.3%, lead 4.9%, nickel 0.3%, tin 0.6% and zinc 2.8%.

European markets were also troubled by disappointing earnings results, falling for the first session in four. Britain's FTSE dipped 0.57%, Germany's DAX 0.66% and France's CAC 0.47%.

TRADING THEMES TODAY

LEAD BOOTS: No surprise that overseas equity markets took a breather after a strong two-three day spike. The falls were modest compared to this week's gains, suggesting a pause, rather than an outright rejection of higher levels. Of greater concern is the further deterioration in base metal prices. In some cases, last night's steep falls wiped out all of this week's gains, plus a little more. That will put our resources sector back under pressure today.

CHRISTMAS SALES: The market will find out at 11.30 am today how our retailers fared over the crucial Christmas shopping season. Heavy discounting in the lead-up to Christmas suggested conditions in the retail sector rermain challenging after three straight interest rate rises. Did the pre-Christmas sales do the trick?

ECONOMIC NEWS: As well as December retail sales, local December building approvals are due at 11.30 am. In the U.S. tonight: unemployment claims, non-farm productivity, labour costs, factory orders and natural gas storage.

Good luck to all.