Market wrap: Shares will open at a three-week high after US stocks rallied in the face of a formidable set of headwinds, and key resources advanced.
The June SPI futures contract ended the night session 27 points or 0.56% stronger at 4810 as Wall Street more than recouped Monday's losses. Oil and industrial metals rebounded but gold eased.
Wall Street suffered an early wobble on news of fresh credit downgrades for Portugal and Greece but powered higher despite slumping consumer confidence, more bad news from the housing market, a recovery in the price of oil and a stronger US dollar. The S&P 500 found support at its 50-day moving average, bouncing to close 0.71% stronger at 1,319. The Dow added 81 points or 0.67% and the Nasdaq put on 0.96%.
"The market is in somewhat of a technical no-man's land," Peter Boockvar, equity strategist at Miller Tabak, told MarketWatch. "We had the sell-off, then we had the bounce-back, and we're trading below recent highs. Growing headwinds are preventing the market from shooting right back up again."
The S&P 500 dropped 0.4% in early trade after Standard & Poor's downgraded Portugal to the lowest investment grade and Greece to one notch higher, a stark reminder that Europe's sovereign debt problems are not over. The major European stock markets traded lower for most of the night before a late rebound as Wall Street turned higher. Britain's FTSE closed 0.47% stronger, Germany's DAX lost 0.06% and France's CAC added 0.27%. Greece's ASE Composite fell 2% and Portugal's PSI 20 index 0.2%.
Sentiment in the US was boosted by remarks from Federal Reserve member James Bullard that the economy was recovering fast enough for the Fed to consider reducing its stimulatory Treasury-buying program early. The upbeat outlook offset the biggest monthly drop in consumer confidence in a year and a sixth straight monthly fall in house prices.
Energy stocks led the recovery in the US as oil turned higher. Crude futures were recently up 73 cents or 0.7% at $104.71 a barrel as scepticism grew that Libyan rebels could fulfil pledges to bring oil to market in the face of UN sanctions.
Copper broke a three-day losing streak in London and aluminium hit a two-and-a-half year high but trading volumes remained unusually low. In London, copper rallied 0.5%, aluminium 1.25%, lead 2.15%, nickel 1.6%, tin 0.2% and zinc 1.6%. US copper was recently down 0.1%.
"Volume has been trending toward abysmal," the managing director of TrendMax Futures in the US told Reuters. "I think everyone is in a holding pattern. You're certainly not going to see people adding risk at this point. There's not going to be a 'risk-on' trade before the end of the month."
Gold drifted lower for a fourth night, hitting a two-week low on modest profit-taking. Gold for June delivery was recently off $2 or 0.1% at $1,419 an ounce. Silver was flat.
TRADING THEMES TODAY
BULLS SKIM OVER TROUBLED WATERS: A very bullish session in the US despite plenty of reasons for the market to retreat. It's always a strong signal when the market rallies in the face of headwinds and there were plenty last night: debt downgrades in Europe, slumping US consumer confidence, grim US housing news and recoveries in oil and the US dollar. Our market has been waiting for direction and got it last night. We should see gains today and hopefully a pick-up in the volume that has been missing these last one-and-a-half weeks if institutional end-of-quarter window-dressing kicks in.
ECONOMIC NEWS: Nothing significant scheduled here today. Tonight's US menu includes ADP's non-farm employment change report, year-on-year job cuts and crude oil inventories.
