If the only tool you have is a hammer, you tend to see every problem as a nail.
Market participants could well be forgiven for switching interest to today’s IPL auction as some top names in the game will go under the hammer. As far as the market is concerned, it’s anybody’s guess as to who will go under the hammer – bulls or bears. This week has been extremely lackluster with the key indices being stuck in a sideways, rangebound trend. Volume and turnover are also down. The market could exhibit a dull trend for a while till a big announcement is made, locally or globally.
In this context, today’s monthly jobs data in the US and next week’s announcement of Obama regime’s stimulus plan will be crucial. But, any upside from these events could be short-lived, as things remain precarious. Corporate commentary continues to be grim. There are still concerns on western banks’ financial health. We expect the market to open higher mainly due to firm global trend. As always, there is no clarity as to whether the early gains would sustain.
If you are a long-term investor, stepping in at this point could be a good move. One should buy on the way down, rather than on the way back up. And, it is near-impossible to know exactly when the bottom is going to be hit. If you have the stomach and the money, then investing at these levels and holding out through the period of bounce back will translate into decent gains.
US stocks rallied on Thursday on optimism about the government's new version of the bank bailout plan and better-than-expected monthly sales from Wal-Mart Stores.
The Dow Jones Industrial Average added 106 points, or 1.3%, to end at 8,063.07. The Standard & Poor's 500 index added 13 points, or 1.6%, to 845.85. The Nasdaq Composite index added 31 points or 2%, to 1,546.24.
Year-to-date, the Dow is down 8.1%, the S&P 500 is down 6.4% and the Nasdaq composite is down 2%.
News Corp. shares could be active on Friday. After the close, the media behemoth reported a quarterly loss of $8.4 billion. Excluding charges, the company reported earnings of 12 cents per share, short of analysts' estimates.
Stocks slumped in the morning after a spike in jobless claims exacerbated worries about the duration of the recession. But the market erased losses and turned higher as investors focused on the few retailers that posted better-than-expected January sales.
The number of Americans filing new claims for unemployment last week rose by 35,000 to 626,000, a more than 26-year high. The figure was worse than what economists were expecting.
Another report showed that factory orders fell 3.9% in December, after dropping a revised 6.5% in the previous month. Economists thought orders would drop 3.5%.
The nation's chain stores reported another rough month of year-over-year sales as the recession continued to gouge consumer spending. Overall sales are expected to have fallen 2.3%, according to Thomson Reuters estimates, versus a gain of 0.4% a year ago.
However, retail sales have been weak for months and the latest batch provided few surprises. With a few exceptions, most retail stocks rose, even when the companies reported weak sales.
Clothing and luxury retailers were hit especially hard in the month. However, not all the news was bad. Discounters such as Wal-Mart Stores continued to benefit. Wal-Mart said sales rose 2.1% in January, topping its own forecasts.
Meanwhile, Gap reported a 20% drop in January sales, missing forecasts. But the company also raised its full-year profit forecast, sending shares higher.
The Obama administration is expected to announce on Monday how it will use the remaining $350bn of the Treasury's Troubled Asset Relief Program (TARP).
Among the reports surfacing are that the government could temporarily suspend or alter the "mark-to-market" accounting rule. This would enable the government to buy bad assets from banks at below-market rate, but not at fire sale prices.
Late on Wednesday, Cisco reported weaker sales and earnings that nonetheless beat estimates. However, the company also said that it expects a sales decline of 15% to 20% in the current quarter. Cisco shares jumped 3%.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 2.89% from 2.94% on Wednesday. Treasury prices and yields move in opposite directions.
Lending rates were mixed. The 3-month Libor rate held steady at 1.24%, unchanged from on Wednesday. The overnight Libor rate rose to 0.32% from 0.25% on Wednesday. Libor is a bank lending rate.
In global trading, Asian and European markets both ended mixed. After four months of cuts, the European Central Bank held interest rates steady at 2%, as had been expected. The Bank of England cut its rate to an all-time low of 1% from 1.5% at the previous meeting.
US light crude oil for March delivery rose 85 cents to settle at $41.17 a barrel on the New York Mercantile Exchange. Gasoline prices rose seven-tenths of a cent to a national average of $1.907 a gallon.
The dollar rose versus the euro and yen. COMEX gold for April delivery rose $12 to settle at $914.20 an ounce.
Due before the market open on Friday, employers are expected to have cut 540,000 jobs from their payrolls in January after cutting 524,000 jobs in December. The unemployment rate, generated by a separate survey, is expected to have risen to 7.5% from 7.2% the previous month.
There is a likelihood that both numbers will be worse than expected, and that the previous two months' figures could be revised lower. Still, investors could take slightly worse numbers in stride - provided payroll cuts are under 600,000 and the unemployment rate is under 8%.
Stocks in Europe closed with tepid losses, as bearish results out of Swiss Re, Zurich Financial and Unilever were checked by a rate cut from the Bank of England and a suggestion of one next month by the European Central Bank.
The pan-European Dow Jones Stoxx 600 index closed 0.1% lower to 194.50 in a see-saw session.
Germany's DAX 30 index closed higher, rising 0.4% to 4,510.49, while the French CAC-40 index slipped 0.1% to 3,066.29 and the UK's FTSE 100 index finished broadly flat at 4,228.93.
Markets ended with deep losses on Thursday. After a flat start, key indices constantly slipped led by selling pressure in auto, IT and capital goods stocks. Although bucking the negative trend were the shipping, metal and select Pharma stocks. Finally, the Sensex slipped 110 points to close at 9,090 and the Nifty fell 23 points to close at 2,780.
Among the 30-components of Sensex, 22 stocks ended in the red and 8 stocks ended in the green. Among the major laggards in the Sensex were Reliance Industries, HDFC, Infosys, L&T and Hindustan Unilever. On the other hand, major gainers were Grasim, ICICI Bank and ITC.
Shares of Tata Metaliks ended lower by 3% to Rs62. The company yesterday announced that it secured prospecting license for iron ore mines in Maharashtra The scrip touched an intra-day high of Rs67 and a low of Rs62 and recorded volumes of over 9,000 shares on BSE.
Shares of ONGC ended flat at Rs665. Reports stated that the company might revive its 15mn ton Rajasthan refinery plan. The scrip touched an intra-day high of Rs680 and a low of Rs655 and recorded volumes of over 3,00,000 shares on BSE.
Shares of PTC India slipped by 2% to Rs61. According to reports, the company announced that it plans to mobilize Rs12bn through QIP. The scrip touched an intra-day high of Rs63 and a low of Rs58 and recorded volumes of over 1,00,000 shares on BSE.
Shares of Ashapura Minechem pared all its gains and ended lower by 3% to close Rs18.7. The stock had earlier surged after reports stated that the company was seeking partner for Maharashtra project . The scrip touched an intra-day high of Rs20 and a low of Rs18 and recorded volumes of over 1,00,000 shares on BSE.
Shares of Maytas Infra continued to slide further; the stock was yet again locked at 5% lower circuit to Rs60.1. There were reports stating that the company plans to set up task force to provide managerial assistance to the company. The scrip touched an intra-day high of Rs60.1 and a low of Rs60.1.
Shipping stocks were the talk of the town on Thursday after the Baltic index of prices for shipping commodities rose the most in over 2 decades.
The Baltic Dry Index rose 15% in London indicating strengthening demand for iron ore. The Baltic Index plunged 92% last year as the global economic recession damped demand for transporting commodities.
Shares of MLL rallied by over 23% to Rs31, ABG Shipyard rose over 3.5% to Rs64 and SCI added 1% to Rs83.
Shares of Tata Motors slipped by 3% to Rs131 after reports stated that the company has built up an amount overdue of more than Rs12bn with parts manufacturers and other suppliers over the past few months.
The company has reportedly stopped making payments and slashed orders for parts on account of decline in sales. The parts manufacturer is owed Rs800mn by Tata Motors.
The scrip touched an intra-day high of Rs133 and a low of Rs128 and recorded volumes of over 6,00,000 shares on BSE.
The declining trend may continue as bears would look to breach the psychological 9,000 mark. Although, with no domestic triggers to look forward, global cues would dictate the trend at least in the opening trades.