Market wrap: Firmer commodity prices and a late recovery on Wall Street point to a modestly positive open for local stocks today.
U.S. indexes slumped early in the session after weak housing data and disappointing earnings in the tech sector, but they clawed back some of the losses before the close. The Dow ended 11 points or 0.11% down on low volume, the S&P was near flat at -0.05% and the tech-heavy Nasdaq gave up 0.48%. The loss was only the Dow's second in 11 sessions during a bull run that has defied most economic signals.
"It's pretty evident that the stock market is separated from the economy right now," said a US director of investments quoted on MarketWatch. "We're not heading for the exits, but we're trimming positions a bit."
Housing starts tumbled 10.6% in October in a blow to the increasing optimism surrounding the US housing market. The fall was the biggest percentage decline for housing starts since January. Economists had expected a flat reading. CPI data showed U.S. consumer prices continued to rise at a moderate pace in October, suggesting a slow economic recovery is containing inflation.
Banks defied the downtrend in the US, rallying 1.34%. REITs added 1.94% and pharmaceutical companies were up 0.58%. Airlines, biotechs, tech stocks and resource stocks were all weaker.
The major European markets finished mixed but little changed after the weak U.S. market open sapped early gains. Britain’s FTSE slipped 0.04%, France’s CAC was off 0.02% and Germany’s DAX rallied 0.16%.
Gold continued to notch up record highs as the US dollar flounders. The spot price punched through the $1,150 mark before falling back to trade recently at $1,144.40 an ounce, an overall rise of $4.
An unexpected fall in US oil stockpiles helped crude prices advance for a third straight day. Crude for December delivery cracked the $80 mark overnight and was recently trading at $79.69 a barrel, up 0.56% for the session.
Copper inched to a 14-month high in London as most base metals gained in price. Nickel recorded its best price in a week. Aluminium was up 1.92%, copper 1.39%, lead 0.92% and nickel 2.59% but zinc slipped 0.26%
Futures traders expect our market to open in positive territory. The SPI futures index advanced 8 points to 4762.
TRADING THEMES TODAY
SHORT-TERM TOP?: For the last two days our market has opened strongly and then fallen away for the rest of the session. It looks ready to pull back. Caution is advisable in the short term, especially with the traditionally weak end of the week nearing. However, with no definitive signs of fatigue in the US, any local weakness is likely to be brief and of little concern to longer-term investors.
ECONOMIC NEWS: The Reserve Bank releases its monthly bulletin at 11.30 am. Also at 11.30: the ABS releases the Average Weekly Wages for August, providing an insight into local labour costs. Tonight in the US: unemployment claims, regional manufacturing and October leading indicators.
