Market wrap: A late rally on Wall Street offers Australian investors the hope of respite this morning after a week of heavy selling.
Futures traders expect our market to open higher for the first session in five. The March SPI futures contract closed 16 points ahead at 4607 this morning after U.S. investors took comfort from a Federal Bank pledge to keep interest rates low.
The major U.S. share indexes were underwater for most of the session but recovered after the Fed issued a more upbeat economic outlook but left short-term interest rates near zero to prop a weak recovery. The Dow rallied 0.41%, the S&P 500 0.49% and the Nasdaq 0.8%.
Investors had been nervously awaiting the Fed outlook for any hints of a move toward tougher inflation-fighting to match China's attempts to rein in growth.
"It doesn't look like there's any material change in outlook or policy path, as indicated by the statement here," a U.S. chief economist and chief investment strategist told MarketWatch. "I think we're probably nearing the end of the era of exceptionally easy money, but it's still going to be easy for some time to come, given the high level of unemployment."
Early trade was dominated by bellwether stock Caterpillar, which sagged 4.3% after revealing a steep decline in fourth-quarter earnings and forecast 2010 earnings below analysts' estimates. Apple rose 1.1% after the company unveiled its long-awaited tablet computer, the "iPad".
A big rally in the financial sector balanced weakness across resource shares. The S&P Bank Index surged 3.8% and the Nasdaq Financial 100 was up 2%.
Oilers and miners finished the session lower as a rising U.S. dollar pressured commodity prices. The U.S. dollar index, which measures the greenback against a basket of major currencies, was recently up 0.47% at 78.80, close to its highest level since August.
Oil futures continued to sink under worries over Chinese growth. Crude futures were recently trading 1.35% lower at $73.70 a barrel, close to a one-month low. Gold also retreated. The spot price was recently down $10 or 1% at $1,086.90 an ounce.
Base metals slumped to multi-week lows on a combination of Chinese growth fears, a rising U.S. dollar and fears that the Obama plan to limit U.S. proprietary bank trading could impact industrial metals. Copper hit a five-week low, aluminium a seven-week low and zinc a two-month low. In London, copper fell 2.4%, aluminium 1.9%, lead 3.4%, nickel 0.6%, tin 1.3% and zinc 4.1%.
The major European markets finished lower for the fifth session in the last six. Britain's FTSE closed down 1.13%, Germany's DAX 0.45% and France's CAC 1.24%.
TRADING THEMES TODAY
CAUTION: A positive lead from Wall Street should translate into modest gains on our market today, but softer overnight commodity prices will maintain pressure on the resources sector. Not a day for big bets IMO. I'd like to see some stability in Asia and a healthy rally on Wall Street first.
ECONOMIC NEWS: President Obama delivers his State of the Union address at 1 pm Australian EST today. Wall Street is nervous about moves to halt proprietary trading by the big banks. It will be worth keeping an eye on U.S. futures trading for the reaction to the speech. Later tonight in the US: December durable goods orders, unemployment claims, natural gas storage and possibly a nomination vote for Federal Bank Chairman.
