Market registers good gains despite weak housing data and Asian market turmoil
US Market surprised everyone today by bucking the trend of losses as it was expected that market will end sharply lower. Indices stayed in the positive territory for the entire day and closed at the highest level of the session today, Monday, 28 January, 2008. Asian market had registered large losses yesterday and home sales data from Commerce Department also disappointed. But strength in the financial sector helped the market gain a late rally. Nine out of ten sectors ended higher for the day.
The Dow Jones industrial Average ended the day with a gain of 176.7 points at 12,384. The Nasdaq Composite Index, finished higher by 23.7 points at 2,350. S&P 500 finished higher by 23.36 points at 1,354. Twenty-seven out of thirty Dow stocks ended in the green today. American Express and Citigroup were couple of main Dow winners.
On the economic front, Commerce Department reported that December new home sales came in at a seasonally adjusted annual rate of 604,000 (against expected sales of 647,000), which is 4.7% less than last month's reading and is 40.7% less than last year's number. The Commerce Department also reported that U.S. builders slashed prices by more than 10% in December though the same failed to boost sales.
On the earnings front, McDonald's topped earnings expectations while Verizon came in-line with expectations. However, Mc Donalds led the team of Dow laggards today as investors were disappointed with its flat December U.S. same-store sales.
Traders expect more rate cuts coming
Stocks fell to their session lows shortly after the release, but then recovered into positive territory as traders increased their bets on the size of a Fed Funds rate cut on 30 January.
Indian ADRs ended mixed today. Rediff.com was the largest decliner shedding almost 18%. ICICI Bank and HDFC Bank closed higher by 2.7% and 0.9% respectively.
Last week, Federal Open Market Committee (FOMC) approved a 75 basis point intermeeting cut in the fed funds rate to 3.50%. The Board of Governors also approved a 75 basis point cut in the discount rate to 4%. This was Fed’s first move this year to keep recession at a bay.
Today volume surpassed 1.6 billion on the New York Stock Exchange, and advancing stocks outran declining issues 4 to 1. On the Nasdaq, neared 2.1 billion shares exchanged hands, and advancers beat decliners, roughly 5 to 2
Economic reports to dictate tomorrow’s reaction
Crude prices erased earlier losses and finally ended higher today. Prices rose today after the dollar fell against the euro. Expectations about another rate cut from Federal Reserve in its upcoming meeting on January end also boosted prices. This was crude’s third consecutive rise in prices. In the earlier two sessions, crude had gained almost $4.
Crude-oil futures for light sweet crude for February delivery today closed at $90.99/barrel (higher by $0.28/barrel or 0.3%) on the New York Mercantile Exchange. Prices are 64% higher than a year ago. Earlier it dropped more than 2% to an intraday low of $88.78.
The Federal Open Market Committee meets tomorrow, convening before making an official monetary policy statement on Wednesday. Apart from that, investors will again be focused on economic and earnings reports tomorrow. 3M is the main Dow name to report their earnings tomorrow. In terms of economic data, December's Durable Goods Orders data (providing an indication of recent economic trends) and Consumer Confidence results for January (assessing the general attitude and outlook of U.S. consumers) are expected.