Market wrap: Stocks will open firmly in the red for a second day after heavy falls on resources markets and losses for European and US equities.
Early gains on Wall Street after bright employment news evaporated when housing figures came in below expectations, reigniting concerns about economic recovery. The disappointing data compounded the Street's skittish mood after yesterday's news that the Federal Reserve will start to phase out its support for credit markets.
The S&P 500 dropped 0.95%, the Nasdaq lost 1.1% and the Dow 0.43%. European markets, which had been improving throughout the night, followed Wall Street south. London lost 1.17%, Paris 1.66% and Frankfurt 1.7%.
Initial claims for jobless benefits in the US fell 21,000 to 530,000 last week, beating analysts' expectations of a reading of 550,000 claims. But investors were spooked by news that sales of existing homes fell 2.7% last month, snapping a four-month streak of rising activity that was expected to continue.
There was again red across the bourse: banks lost 1.63%, REITs 3.48%, oilers 1.81%, precious metals miners 2.26% and transport companies 1.75%. Defensive sectors such as pharmaceuticals, utilities and insurers fared better but still finished underwater.
Crude oil futures tumbled to their lowest level in two months as traders continued to fret about rising US inventories and weak demand. Crude was recently trading at $66 a barrel, down more than 4% for a second consecutive day. Gold futures weakened as the US dollar rallied. The spot price hit $1018 in early trade but recently slumped to $993.50.
Base metals also lost ground. Copper tumbled 4.13% to its lowest level since early August. Aluminium slipped 1.75% and there were losses for nickel, lead and zinc.
Futures traders expect yesterday's retreat on our market to continue at today's opening bell. With 20 minutes left to trade, the SPI futures index was down 49points at 4678.
TRADING THEMES TODAY
DEFENSIVE STOCKS: When market sentiment deteriorates, the big boys rotate money into sectors such as health, utilities, telecoms and consumer goods. These may not finish green today but they will likely fare better than cyclicals.
BOUNCE TRADES: There will be blood on the floor in the first half-hour of trade and that's where most of the opportunities come on a day like this. Look to buy up-trending stocks that have been retracing for at least a day or two and tumble to a natural support level. The faster they fall this morning, the greater the likelihood of a decent bounce. Avoid stocks that grind steadily lower all day - for day trades at least. On days like this, I tend to make 80% of my profits in the first hour.
ECONOMIC NEWS: Nothing significant on the local calendar today but plenty tonight in the US. Consumer confidence and durable goods orders are always watched closely but last month's new-home sales take on particular significance after this week's disappointing existing-home sales data.
