The good ended happily, and the bad unhappily. That is what Fiction means.
In reality, the bulls seem to now be on Cloud 9. The good mood is largely due to strong global markets, which have held up despite unprecedented job cuts and poor earnings. Traders and investors alike are hoping that the much-hyped stimulus by Barack Obama will be able to achieve what the previous ones have failed to do so far. The House of Rep. has already cleared the bill. The Republicans however abstained from the vote. Plans are also afoot to put all the toxic assets into a so-called “bad bank” in a bid to shore up the credit markets. Obama’s team may announce the outlines of its plan next week.
Back home, the Government has announced another fuel price cut. The move will cheer automakers, consumers and the markets. But, shares of Oil PSUs may take a knock. Inflation will be announced today. It is likely to fall after a minor blip. The fuel price cut will take it down further. We expect the market to continue this week’s momentum. However, one should not get carried away as most of this is led by short covering. Ensure a timely exit so that one doesn't get caught on the wrong foot.
US stocks rose on Wednesday, led by banks on reports that the Treasury Department would take "toxic" assets off the balance sheets of financial firms and put them into a so-called "bad bank".
Stocks rallied early, and the Dow Jones Industrial Average finished up by more than 200 points after the Federal Reserve's afternoon statement hinted it may buy long-dated Treasury bonds and take other measures to keep rates down in credit markets.
Whether this is another bounce for financial stocks and the broad market or a definitive end to the crisis depends on details of the latest bank-rescue plan, and how it works in practice, according to market experts.
The S&P 500 added 28 points, or 3.4% to 874.09, with financial companies posting 19 of the top 20 gains. The Dow Jones Industrial Average climbed 200 points, or 2.5%, to 8,375.45. The Nasdaq Composite index added 53 points or 3.6%, to 1,558.34.
The Dow has now gained for three sessions in a row, while the S&P 500 and Nasdaq have gained for four sessions in a row.
However, some Wall Street observers reckon that while the recent bout of optimism could lift stocks in the short term, beyond that is the risk of the major indices sliding back to the November lows and perhaps even lower.
The Fed kept the fed funds rate, a key bank lending rate, in a range between 0% and 0.25%, as expected, and indicated it would keep it there for the foreseeable future. In its statement, the FOMC painted a more dire picture of the economy than it has in recent months.
The Fed also discussed the tools it has available to help the economy, saying it was "prepared" to buy long-term Treasurys if it decides that doing so would help private credit markets. At the last meeting, the central bank said it was "evaluating" buying Treasurys.
Wednesday's advance was also led by some positive news from the banking industry. Reports said that the Treasury Department was moving forward on setting up a "bad bank" to buy up the industry's toxic assets. A published report suggested that the Federal Deposit Insurance Corp. (FDIC) would take control of any such bank. The FDIC told Reuters it wouldn't comment.
Optimism about the Obama administration's stimulus plan and Wells Fargo's better-than-expected quarterly results also added to the momentum.
The House voted, 244-188, on Wednesday evening for President Obama's package of federal tax cuts and spending worth $819 billion and meant to jump-start the economy out of its worst crisis in decades. However, the House vote is just the first step in a process that will take several weeks.
Wells Fargo posted a steep $2.6 billion quarterly loss Wednesday, hurt partly by its purchase of Wachovia. But excluding charges, Wells Fargo earned 41 cents per share, in line with a year earlier, and better than the 33 cents analysts surveyed by Thomson Reuters expected.
The bank also maintained its dividend and said it has no plans to ask for more Treasury bailout money beyond the $25 billion it accepted last year. Wells shares rallied almost 31%.
Dow component AT&T reported lower quarterly earnings and higher revenue, both of which missed expectations. The telecom leader saw strong growth in its wireless subscribers, but its profit fell due to subsidies it had to pay to support Apple's iPhone. Shares ended little changed.
Boeing reported a fourth-quarter loss Wednesday as a two-month strike by its assembly workers and delivery delays hurt its results. The aerospace firm forecast 2009 earnings that are short of expectations. Boeing also said it would cut 10,000 jobs this year, mostly in the first half. The number includes 4,500 job cuts already announced in early January. Boeing shares ended little changed.
Yahoo reported quarterly sales and earnings that topped estimates after the close Tuesday. Including charges, the company reported a loss. Shares gained 7.9% on Wednesday.
Treasury prices slumped, raising the yield on the benchmark 10-year note to 2.66% from 2.52% on Tuesday. Treasury prices and yields move in opposite directions. Yields on the 2-year, 10-year and 30-year Treasurys all hit record lows last month.
Lending rates were mixed. The 3-month Libor rate dipped to 1.17% from 1.18% on Tuesday. Overnight Libor held steady at 0.22%. Libor is a bank-to-bank lending rate.
US light crude oil for March delivery rose 58 cents to settle at $42.16 a barrel on the New York Mercantile Exchange. Gasoline prices rose two-tenths of a cent to a national average of $1.842 a gallon.
The dollar gained versus the euro and the yen. COMEX gold for April delivery fell $11.40 to settle at $890 an ounce.
After the close, Starbucks reported quarterly sales and earnings that were short of forecasts and said it could cut up to 6,700 jobs in 2009. Thursday brings reports on durable goods orders and new home sales in December, as well as earnings from Dow component 3M.
European stocks climbed on Wednesday. The pan-European Dow Jones Stoxx 600 climbed 3.2% to 194.32 with banks surging ahead. The UK's FTSE 100 closed up 2.4% at 4,295.20, while Germany's DAX 30 index added 4.5% to 4,518.72 and the French CAC 40 index climbed 4.1% to 3,076.01.
Markets ended with smart for the second straight trading session on Wednesday. Key indices extended gains largely on the back of firm cues from the international equity markets and short covering witnessed in the second half of the day. Finally, the BSE Sensex advanced 253 points to close at 9,257 and the Nifty gained 78 points to close at 2,849.
Among the 30-components of Sensex, 27 stocks ended in the green and only 3 stocks ended in the negative terrain.
Among the major gainers in the Sensex were Reliance Industries, ICICI Bank, L&T, Infosys and HDFC. RCm, Maruti and Sterlite were among the major laggards.
Shares of Genus Power gained by a percent to Rs93.8 after the company announced its results for nine months ended December 31, 2008. Company's income from operations increased by 17% to Rs3,401mn from Rs2,896mn reported in the corresponding nine months.
The Profit after Tax has increased by 19% in the present nine months to Rs309mn from Rs260mn reported in the nine months ended December 2007. The scrip touched an intra-day high of Rs95.8 and a low of Rs92.5.
National Aluminium Company Ltd (NALCO) announced Unaudited results for the quarter ended December 31, 2008:
The Company has posted a Net Profit for the period of Rs2,194.6mn for the quarter ended December 31, 2008 as compared to Rs3,294.4mn for the quarter ended December 31, 2007.
Total Income decreased from Rs12,472.6mn for the quarter ended December 31, 2007 to Rs11,492.2mn for the quarter ended December 31, 2008.
The board of directors of the company also announced that it approved payment of 35% interim dividend on the paid-up equity share capital of Rs6.44bn for the financial year 2008-09. The stock was up by over 3.5% to Rs198 after hitting an intra-day high of Rs208 and a low of Rs181 and recorded volumes of over 4,00,000 shares on BSE.
Power Grid Corp. announced that it signed a US$400mn loan agreement with the World Bank. The loan, guaranteed by the Indian government, will be used to fund transmission projects, the company said. The stock up by over 2.5% to Rs90 after hitting an intra-day high of Rs91.5 and a low of Rs88 and recorded volumes of over 13,00,000 shares on BSE.
Welspun Gujarat Stahl Rohren announced that it won orders worth Rs5bn from Gas Authority of India Ltd. (GAIL). With this order of LSAW Pipes, the current order book position of the company stands at over Rs100bn.
This is in conjunction with other significant orders which the Company obtained in the last few months. The outstanding order book position is more than twice of the Company's FY08 revenue of Rs40bn.
The stock was up by over 10% to Rs76 after hitting an intra-day high of Rs77.8 and a low of Rs69 and recorded volumes of over 1,00,000 shares on the BSE.
Sesa Goa announced that shareholder, Sociedade De Fomento Industrial Pvt. Ltd. disclosed to the Company. Sociedade De Fomento Industrial Pvt Ltd. along with M/s. Prime Mineral Export Pvt. Ltd. has acquired shares in the paid-up Share Capital of the Company exceeding 5%.
The stock rallied by over 11% to Rs80 after hitting an intra-day high of Rs82 and a low of Rs72 and recorded volumes of over 49,00,000 shares on the BSE.
Shares of McDowell rallied by over 15% to Rs571 after the company announced that it is in talks with Diageo Plc to sell a stake. The company hasn’t concluded talks with Diageo. The scrip touched an intra-day high of Rs584 and a low of Rs500 and recorded volumes of over 51,00,000 shares on BSE.
Markets would look to extend gains again however, trading might turn volatile on account of F&O expiry. While, on the global front, the Federal Reserve will make an announcement later today after its two-day meeting.