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Wall Street closes flat amid low volume
Published 11:13 PM, 5 Apr 2011 Last update 6:51 AM, 6 Apr 2011

Reuters

NEW YORK - The S&P 500 failed to break a key technical resistance level for a second day on Tuesday as low trading volume raised further questions about the market's strength.

The broader market index closed slightly below 1,333, a closely watched level as it represents a doubling from the low reached in March 2009.

Trading volume was relatively low with just 6.85 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, compared with last year's estimated daily average of 8.47 billion.

But a rebalancing of the Nasdaq 100, which takes effect on May 2, spurred traders to buy companies with increased weightings, including Microsoft Corp, Intel Corp and Cisco Systems Inc, all of which rose around one per cent.

"The (low) volume is a sign that there is little conviction from sellers in this market," said Jeff Kleintop, chief market strategist for LPL Financial in Boston.

The S&P has slowly built gains since mid-March in mostly quiet sessions. Last week was the thinnest week of trading so far in 2011 and Monday was the lowest-volume day of the year.

"Those wishing for more volume should be careful what they wish for since a rebound in trading volume may come with the return of volatility, rather than the steady gains we have seen since last summer."

Minutes of the last Federal Reserve meeting showed some Fed officials believed the U.S. central bank should tighten conditions before year-end. Stock market reaction was muted.

Chip stocks were supported after Texas Instruments late Monday offered to buy National Semiconductor in a deal worth $6.5 billion, a premium of 78 per cent. The PHLX semiconductor index rose 2.3 per cent.

The Dow Jones industrial average slipped 6.13 points, or 0.05 per cent, to end at 12,393.90. The Standard & Poor's 500 Index inched down just 0.24 of a point, or 0.02 per cent, to 1,332.63. The Nasdaq Composite Index rose 2.00 points, or 0.07 per cent, to 2,791.19.

Apple Inc's weighting was slashed, though it remains the biggest component of the Nasdaq 100. The stock was down 0.7 per cent at $338.89 after earlier falling as much as 1.5 per cent.

The announcement of a merger with Texas Instruments drove National Semi shares up 71 per cent to $24.06. Texas Instruments added 1.7 per cent to $34.69.

"Tech stocks are leading this big wave of merger and acquisition activity, which people are trying to position themselves ahead of and which I expect to continue," said James Swanson, chief investment strategist at Boston-based MFS Investment Management, which oversees about $200 billion.

The deal is the latest in a string of multibillion-dollar deals that have helped pushed stocks higher in recent weeks.

China's central bank increased interest rates on Tuesday for the fourth time since October, raising suspicions that data next week may show higher inflation than expected in March.

KB Home shares dropped 4.2 per cent to $11.69 after it reported a first-quarter loss that widened from the previous year, hurt by a fall in net orders.

Advancing stocks outnumbered declining ones on the NYSE by 1,629 to 1,312, while on the Nasdaq, advancers beat decliners by 1,328 to 1,270.

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Gold jumps on inflation fears
Published 2:33 AM, 6 Apr 2011 Last update 6:25 AM, 6 Apr 2011

Reuters

NEW YORK - Gold jumped to an all-time high above $US1,450 an ounce, as peak crude and corn prices fanned inflation fears and a downgrade of Portugal's credit rating drew attention to euro zone problems.

Bullion rose more than one per cent, its biggest gain in more than a month of range-bound trading. Silver soared to a 31-year peak. Both drew support from Federal Reserve Chairman Ben Bernanke's comments late on Monday suggesting he was committed to completing a $US600 billion stimulus program as scheduled in June.

On technical charts, gold broke above a recent double-top technical formation around $US1,440 an ounce. This added to a rush of buying triggered by news that Portugal's leading banks threatened to stop buying government debt hours after a Moody's downgrade.

"Bernanke's comment makes inflation a more real event in the United States. He at least acknowledged the fact that the Fed needs to monitor inflation very closely, and that spooked investors into gold," said Mark Luschini, chief investment strategist at broker-dealer Janney Montgomery Scott with $US53 billion in assets under management.

Spot gold gained 1.1 per cent to $US1,452.31 an ounce at 3:16 a.m. EDT (1916 GMT), off the session high, a record $US1,455.06 an ounce.

US gold futures for June delivery settled up 1.4 per cent at $US1,452.50, with trading volume approaching 160,000 lots, about one-fourth below the 30-day average but sharply higher than that of Monday's.

COMEX gold options floor trader Jonathan Jossen said options volatility was subdued despite a rally in underlying futures. However, quiet options trade has in the past foreshadowed a sharp move in gold prices, Jossen said.

Investor Dennis Gartman, publisher of the Gartman Letter, said gold was free from liquidation pressure once it breached $US1,441 an ounce, a level which had triggered selling.

"It appears that gold is beginning a new up-trend after its recent consolidation," said Adam Sarhan of Sarhan Capital. "If gold negates this breakout and falls back below $US1,440 to $US1,430, one would expect sideways action to continue."

Silver gained 1.8 per cent to $US39.12 an ounce, after hitting a session high of $US39.25. That was the highest since the Hunt Brothers cornered the market in the early 1980s, when silver briefly hit a record of just below $US50 an ounce.

Silver outperformed gold in the first quarter, rising 22 per cent while gold rose 0.7 per cent. The gold:silver ratio, which shows how many silver ounces are needed to buy an ounce of gold, fell to a 28-year low at 37.3.

UBS said silver investors show no sign of being ready to sell, even though there is a "real danger that silver prices have travelled too fast, too soon." Silver at $US40 an ounce appears inevitable in the near term, UBS said.

Rising oil and grain prices boosted gold's appeal as an inflation hedge. Brent crude rose to a 2-1/2-year highs on geopolitical risks to supply from the Middle East, while corn futures hit a record high on persistent worries over tight supplies.

Fed monetary policies eyed

On Monday, Bernanke said an increase in US inflation has been driven primarily by rising commodity prices globally, and was unlikely to persist. He said the Fed would monitor inflation and inflation expectations very closely.

"What it shows is that big money continues to believe gold will go higher...because Bernanke wants to grow at any cost," said Axel Merk, portfolio manager of the Merk Mutual Funds, which manages more than $US600 million of fund assets.

Gold rose more after the Fed released minutes of its March 15 meeting, showing some Fed officials believed they would have to hold to an easy monetary policy course beyond this year, while a few said the central bank should move to tighter conditions before year-end.

Last November, the Fed initiated a $US600 billion bond buying program. The program is scheduled to end in June. Gold has been a major beneficiary since the Fed has kept short-term rates near zero since December 2008.

Gold is also benefitting from concerns that some smaller euro zone economies such as Portugal and Ireland will keep struggling with sovereign debt, and from jitters over Western air strikes in Libya and unrest in the Middle East.

Earlier in the session, gold fell in tandem with other commodities after China raised interest rates for the second time this year.

Gold has largely ignored previous monetary tightening from China, which tends to weigh more heavily on industrial commodities like copper. In addition, official data from China shows that inflation appears to be tapering off after its series of rate hikes this year.

Investors will seek more clues from an interest rate decision from an European Central Bank policy meeting on Thursday. The ECB is widely expected to raise its benchmark rate by 25 basis points to 1.25 per cent.

Higher interest rates usually weigh on gold, but the metal could gain if rate differentials weaken the US dollar.

For platinum group metals, platinum rose 0.4 per cent to $US1,786.99 an ounce, while palladium also gained 0.9 per cent to $US786.22.