"Christmas is the time when kids tell Santa what they want and adults pay for it.
Deficits are when adults tell government what they want and their kids pay for it.”
The Santa Clause rally seems to be losing steam as worries abound over the deepening global recession in its adverse impact on earnings. Major global companies like Toyota have already started preparing the markets for the bad news ahead by issuing profit warnings. A whole host of global companies have announced massive job cuts. Manufacturing firms are trimming production to cope with the severe slowdown. Governments across the globe continue to bailout specific industries as well as companies. Then you also have the scam involving Bernard Madoff. Several banks and firms have confessed to having been hit by the massive fraud. Meanwhile, a fund manager who did business with Madoff has been found dead in mysterious circumstances in New York. On the economic front too, there doesn't seem to be any respite, with data showing that GDP in the US and UK shrunk in the quarter ending September. The housing sector in the US remains in doldrums and may take a while to recover.
Back home too, the mood seems to have gone sour yet again in the last couple of sessions. The bulls appear to be lacking the ammunition and confidence to push the Sensex higher after over 10% gain this month. The past two sessions have been rather disappointing for the bulls, who were hoping to extend the recent advance. The trend could turn positive again if global indices rebound, and FIIs resume their shopping spree. The F&O expiry today will make things much more volatile. We expect a cautious to slightly lower opening and a choppy day.
US stocks ended lower again on Tuesday amid concerns about the health of the auto and housing industries, even as the government confirmed that the world's largest economy shrank by 0.5% in the July-September quarter.
The market had drifted lower for most of the day, but losses accelerated in late afternoon trade.
After falling in the last four sessions, the Dow Jones Industrial Average finished at 8,419.49, off 100.28 points, or 1.2%. Just five of the blue-chip index's 30 components finished in the black.
The S&P 500 Index shed 8.48 points, or 1%, to 863.15. Consumer discretionary, utilities and IT paced the sector losses among the S&P's 10 industry groups, with telecom services and healthcare hit the least.
The Nasdaq Composite Index erased 10.81 points, or 0.7%, to 1,521.54.
Market breadth was negative. Declining shares outpaced advancers roughly two-to-one as about 37 million shares changed hands on the New York Stock Exchange (NYSE). On the Nasdaq, nearly 500mn shares traded and decliners topped advancers 9 to 5.
The grim tone for Tuesday's session was set early by a raft of downbeat economic reports on housing, consumer sentiment and GDP.
The National Association of Realtors said sales of existing homes fell 8.6% in November to a seasonally adjusted annual rate of 4.49mn units from a downwardly revised 4.91mn units in October. November sales are down more than 10% versus last year and were weaker than the 4.93mn units economists forecasted.
The Realtors also said that the median existing home sold for US$181,300 in November, down 13.2% from a year ago when the median was US$208,800.
Separately, the Census Bureau said sales of new homes fell 2.9% in November to a seasonally adjusted annual rate of 407,000 from a downwardly revised total of 419,000 in October. That tally was worse than the seasonally adjusted 420,000 that economists forecasted.
The University of Michigan unexpectedly revised its consumer sentiment index higher to 60.1 from the 59.1 it announced on Dec. 12. Economists had forecast a downward revision to 58.6.
"The most significant change recorded in the December survey was the record plunge in inflation expectations," said Richard Curtin, the director of the University of Michigan Surveys of Consumers in a statement. Still, he warned that rising unemployment and the weak economy remain major concerns for consumers.
The Commerce Department said before the market opened that GDP shrank at a 0.5% annual rate in the third quarter. It was the third and final revision for third-quarter GDP, and the decline was in line with economists' expectations.
Shares of General Motors (GM) and Ford Motor were each down about 15% after both automakers drew downgrades from two major ratings agencies after Monday's close. Standard & Poor's said the risk of bankruptcy remains high, regardless of government loans.
ProLogis gained 10.3% after the real-estate investment trust said it was selling its operations in China and property-fund interests in Japan to GIC Real Estate for US$1.3bn, plus assumed liabilities.
Shares of CIT Group gained 1.9% after the commercial-finance company said it entered into definitive agreements with the US Treasury Department to tap US$2.33bn in Troubled Assets Relief Program funds.
American Express, the credit card company-turned-commercial bank, said it has received preliminary approval for a US$3.9bn government bailout investment.
The capital injection will come from the Treasury Department's US$700bn Troubled Asset Relief Program, which in part provides capital to banks. Shares of the company fell 2.5% despite the news.
Shares of Textron lapsed 20.5% after the company lowered its adjusted fourth-quarter earnings outlook late on Monday and said it would trim about 5% of its global workforce.
Unisys Corp., trading as a penny stock, advanced 45.3% after its announcement late on Monday that it would act to reduce costs, including laying off about 1,300 workers.
The yield on the benchmark 10-year note rose to 2.16% from 2.14% on Monday. The 10-year yield dipped below 3% in November for the first time since the note was first issued in 1962.
Lending rates were mixed. The 3-month Libor rate held steady at 1.47%. The overnight Libor edged up to 0.12% from 0.11% on Monday. Libor is a key bank lending rate.
The dollar fell versus the euro and the yen. COMEX gold for February delivery was fell US$9.10 to settle at US$838.10 an ounce.
US light crude oil for February delivery slid 93 cents to settle at US$38.98 a barrel in New York. Gasoline prices fell overnight to a national average of US$1.659 from US$1.663 a gallon.
Shares closed almost unchanged in European trading on Tuesday. The pan-European Dow Jones Stoxx 600 index slipped 0.1% % to 193.05. Economic data continued to paint a gloomy picture, with UK's GDP contracting more than expected in the third quarter.
The FTSE 100 index in London closed up 0.2% at 4,255.98, while Germany's DAX 30 index fell 0.2% to 4,629.38 and the French CAC-40 index lost 0.7% to 3,128.41.
Tuesday saw Indian markets open with a negative gap. Overnight losses in the US and weak Asian markets dragged the key indices at open. Markets continued to remain jittery ahead of the F&O expiry. The rate sensitive stocks were offloaded and also the second rung stocks were hammered. Finally, the BSE benchmark Sensex ended at 9,686 losing 241 points and the NSE Nifty index ended at 2,968 losing 71 points.
All the BSE Sectoral indices ended in the red with BSE Consumer Durable index (down 6%), BSE Realty index (down 5%), BSE Bankex index (down 4%) and BSE Capital Goods index (down 3.6%).
Market breath was negative, 1,744 stocks declined against 730 advances, while, 82 stocks remained unchanged.
Wipro announced that it would provide details of its deal with Origin Energy of Australia at a press conference in Bangalore later today.
The stock ended at Rs242 lower by 1.5%. The scrip touched an intra-day high of Rs247 and a low of Rs240 and recorded volumes of over 1,00,000 shares on BSE.
Shares of Bajaj Hindustan advanced by 4% to Rs62.7 after reports stated that Rahul Bajaj would sell 29.6% stake in the company to Shishir Bajaj giving him full control over the sugar company. The scrip touched an intra-day high of Rs64 and a low of Rs60 and recorded volumes of over 1,00,000 shares on BSE.
Shares of Jain Irrigation advanced by 4% to Rs333 after reports stated that IFC proposes to give a corporate loan of up to US$45mn to the company. The scrip touched an intra-day high of Rs337 and a low of Rs320 and recorded volumes of over 6,000 shares on BSE.
Shares of Suzlon Energy dropped by over 6% to Rs56 after the company declined reports stating that Suzlon may sell as much as 15% of itself to U.S.-based Carlyle Group and TPG Capital for US$300mn.
The stake sale may be part of Suzlon's plans to raise as much as US$500mn, Reuters reported, citing unnamed bankers. The company may also raise US$200mn through debt, the report said.
The scrip touched an intra-day high of Rs63 and a low of Rs55 and recorded volumes of over 1,00,00,000 shares on BSE.
RCom advanced by 1.5% to Rs216 after reports stated that the company has set aside US$1bn for its 3G telecom services rollout. The scrip touched an intra-day high of Rs218 and a low of Rs209 and recorded volumes of over 31,00,000 shares on BSE.
The overall outlook remains uncertain, as nobody wants to take undue risks at this stage with only a few sessions to go in the year. Also with F&O expiry tomorrow, it would be wise to stay on the sidelines.
Data to watch out for in the US & Europe today:
- Q3 GDP numbers,
- Consumer sentiment numbers,
- Existing home sales,
- New home sales and
- Retail sales index data.
- The European Monetary Union current account and
- UK Q3 GDP (QoQ).