Shares face a soft start after key commodities retreated and the Dow's run at an all-time record was stymied by the failure of rival sequester bills in Congress.
The March SPI 200 futures contract gave back 17 points or 0.3% of yesterday's surge, ending the night session at 5068.
The Dow charged to within 15 points of its 2007 record high before surrendering its gains as last-ditch efforts to avoid automatic cuts to US government spending floundered in Congress. The blue-chip index closed 21 points or 0.15% weaker at 14,054 after earlier hitting 14,149. The S&P 500 dipped 0.07% but secured a fourth straight monthly gain. The Nasdaq lost 0.07%.
The Dow's charge came on the back of improved jobless claims, strong regional manufacturing data and an upwards revision to GDP that was smaller than expected. Weekly jobless claims dropped 22,000 to 344,000, while a measure of manufacturing in the greater Chicago area marked an 11-month high last month. However, an upwards revision in last quarter's GDP from -0.1% to +0.1% was short of economists' expectations for a revised figure around 0.5%.
"Even though the GDP headline was a bit disappointing relative to expectations, we saw a revision up and the underlying components seem healthier," the chief investment strategist at PNC Wealth Management in the US told Bloomberg. "There's less concern about the durability of the recovery."
Share indexes began to reverse after a pair of bills aimed at amending US$85 billion of government spending cuts due to come into force tonight failed to secure enough votes in the Senate. A Republican bill secured 38 of the 60 "yes" votes it needed and a rival Democrat bill 51 votes. Spending cuts are now scheduled to take effect gradually over the year ahead. Read more here.
Gold sealed its fifth straight monthly loss after extending Wednesday's fall overnight as a firming greenback dimmed the appeal of alternative stores of wealth. Gold for delivery in April was lately down $16.70 or 1.1% at US$1,579 an ounce. May silver dropped 47 cents or 1.6% to US$28.47 an ounce.
Oil accelerated a modest overnight decline as US equities reversed. West Texas crude for April delivery slipped 86 cents or 0.9% to US$91.91 a barrel.
Base metals continued to be crimped by weak Chinese demand and rising inventories. US copper for March delivery was recently off two cents or 0.5% at US$3.55 a pound. In London, copper fell 0.7%, aluminium 0.8%, lead 0.9%, nickel 0.45%, tin 0.3% and zinc 1.45%.
TRADING THEMES TODAY
WEAK OPEN, THEN WAITING FOR CHINA: Ouch. A promising night in the US soured in the final hour and a half as the political deadlock in Congress ensured no last-minute sequestration deal. To be fair, the Dow was never likely to take out the old record high without an initial sniff and retreat. Having yesterday anticipated a better overseas session, our market is due to give some back this morning. Market heavyweight BHP trades without its dividend today and that alone is enough to strip a few points off the index. The early tone is likely to be soft as the institutional traders unwind a little of yesterday's end-of-month "window dressing", but the final reckoning will depend largely on Chinese manufacturing reports at noon EST and 12.45pm (see below).
CHINESE MANUFACTURING: Today brings the official government manufacturing index, plus the final version of a private index that raised a red flag last week over the pace of growth in our trading partner. The China Federation of Logistics and Purchasing Purchasing Managers' Index is due at noon EST and is expected to inch up to 50.5 from a reading of 50.4 in January. HSBC's Final Manufacturing PMI, due at 12.45pm, generally attracts less attention unless there is a significant deviation from the preliminary reading of 50.4.
COMPANIES REPORTING: Most of the big names have reported but there are plenty of earnings due today including past and present day-trade thread favourites such as AZS, CKA, NVG and CCC. More listings here.
ECONOMIC NEWS: The AIG Manufacturing Index is due at 9.30am EST. Year-on-year commodity prices are due at 4.30pm. Rival Chinese manufacturing indexes are due at noon and 12.45pm (see above). A heavy schedule in Europe tonight includes unemployment, manufacturing and inflation data. Highlights in the US include: rival manufacturing indexes, a speech by Federal Reserve Chairman Ben Bernanke, revised consumer sentiment and inflation expectations, personal income and spending, core price index, construction spending, manufacturing prices and vehicle sales.
