The first lesson of economics is scarcity... The first lesson of politics is to disregard the first lesson of economics.
Populism seems to be gaining ground, with the announcement on Lok Sabha polls expected anytime now. After the fuel price cut, the Government now wants nationalised banks to lower rates further. PNB has already cut its PLR while SBI has unveiled a special home loan scheme. Some more state-run banks may give into the Centre’s demands. Whether private banks will follow suit or not is not clear as yet.
Coming to the market, the key indices could regain their footing after US stocks managed to hold their own. European shares too recovered from day’s lows. Most Asian markets are up this morning. However, it remains to be seen if the global markets can hold their gains for long given the strong economic headwinds.
All eyes are on Capitol Hill, where the Obama regime is battling hard to get its massive stimulus plan cleared. On the domestic front, there aren’t many catalysts that can drive the market higher. As a result, the market’s direction will largely hinge on global developments. On the whole, we expect the market to be sideways in a tight range in the near term.
FIIs were net sellers in the cash segment on Monday at Rs1.26bn (provisional) while the local institutions too pulled out Rs1.61n. In the F&O segment, the foreign funds were net sellers of just Rs10mn. On Friday, FIIs were net sellers at Rs166mn in the cash segment.
US stocks ended mixed on Monday, as investors grappled with persistent fears about the economy's worsening health and its fallout on corporate earnings. Anxiety over the fate of the Obama administration's stimulus bill and nervousness ahead of Friday's monthly jobs report kept investors jittery.
The Dow Jones Industrial Average lost 64 points, or 0.8%, to 7,936.75. The Dow briefly fell to 7,867, touching the lowest level since November, when the market carved out what some pros think were bear market lows.
The Standard & Poor's 500 index ended just below unchanged, at 825.44. The Nasdaq Composite index gained 18 points, or 1.2%, to 1,494.43.
US stocks slipped in the early going but managed to cut losses as investors breathed a sigh of relief after the release of a slightly better-than-expected manufacturing report. Energy, industrials and materials were down the most while technology shares helped the market pare losses.
The Dow and S&P 500 finished their worst January ever on Friday as investors eyed abysmal reports on economic growth and quarterly earnings. In the month, the Dow lost 8.8% and the S&P 500 lost 8.6%.
Select stocks managed gains on Monday, but any advance is likely to be short-lived.
Consumer spending continued to decline in December, according to a government report. Personal spending fell 1% after falling a revised 0.8% in the previous month. Economists thought it would fall 0.9%. Personal income dropped 0.2% versus forecasts for a drop of 0.4%. Income dropped 0.4% in the previous month.
Another report showed a slight improvement in manufacturing activity in January, rising from a record low. The Institute for Supply Management's manufacturing index rose to 35.6 in January from a revised 32.9 in December. Economists expected the index at 32.5. The number still reflects a recessionary environment.
A third report showed that construction spending fell a worse-than-expected 1.4% in December, after falling a revised 1.2% in the previous month. Economists thought it would fall 1.2%.
After a narrow party-line approval in the House of Representatives last week, the economic stimulus package moved to the Senate. Among the topics of debate: ways to spur housing sales and to help current homeowners avoid foreclosure.
Bank of America tumbled 8.8% on published reports that a group of angry shareholders are planning to demand that Chairman and CEO Ken Lewis be removed at the upcoming annual meeting. BofA was the Dow's biggest loser.
Other big decliners included Boeing, 3M and GE, which tumbled amid the economic worries.
Dow component P&G fell for a second session. On Friday, it reported a higher quarterly profit that was short of forecasts and warned that full-year earnings won't meet its earlier forecast. Shares slipped 3%.
Microsoft and Intel were among the Dow's gainers, rising along with the broader technology sector.
Macy's shares lost 4% in active New York Stock Exchange trading after the retail major said that it was cutting 7,000 jobs or 4% of its total workforce and trimming its dividend.
Chrysler is offering buyouts to all hourly workers in its newest attempt at cutting costs. The news comes one day before Chrysler and other automakers report what are expected to be terrible January sales.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.72% from 2.85% on Friday. 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 rose to 1.22% from 1.18% on Friday. Overnight Libor fell to 0.28% from 0.30% on Friday. Libor is a bank-to-bank lending rate.
US light crude oil for March delivery fell $1.60 to settle at $40.08 a barrel on the New York Mercantile Exchange. Gasoline prices rose 1.3 cents to a national average of $1.88 a gallon.
The dollar fell versus the euro and yen. COMEX gold for April delivery fell $21.20 to settle at $907.20 an ounce.
On the earnings front, Mattel reported a 46% fourth-quarter profit decline from last year, with the results from the world's biggest toy maker much worse than expected. Manufacturer Rockwell Automation lowered its yearly forecast while reporting a 25% slide in fiscal first-quarter profit.
Chip-tools maker Applied Materials lowered its earnings forecast ahead of reporting its first-quarter results next Tuesday.
Tuesday morning brings earnings from Dow stock Merck as well as Motorola and UPS. All three are due to report results before the start of trade. On the economic front, the December pending home sales index is due in the early morning. It is expected to show no change after sliding 4% in the previous month.
European shares declined, with banks by far the worst performers, as investors turned the leaf on a new month. The Dow Jones Stoxx 600 index fell 2.6% to 186.32, with the banking sector down fully 5.6%. The pan-European Stoxx 600 lost roughly 4% in January.
Germany's DAX 30 index declined 1.6% to 4,271.04 and the French CAC-40 index lost 1.5% to 2,930.05. In London, the FTSE 100 index closed down 1.7% to 4,077.78. The biggest snowstorm to hit southeastern England in 18 years left much of the area paralyzed.
Indian stocks gave up nearly half of last week's gains on Monday as investors chose to lock in gains amid mounting concerns about the longevity of the global recession. Apprehensions about the new stimulus package in the US coupled with grim corporate commentary weighed on Asian and European markets. Meanwhile, macro-economic reports on PMI and Trade suggested that the much-awaited economic recovery could still be a little while away. Traders also booked profit after some of the top names like Tata Motors, M&M, DLF and Unitech came out with grim set of results over the weekend.
Stock losses increased amid mounting worries that the global economy may take longer to recover from one of the worst recessions in recent memory. Government data last week showed that the US economy contracted at its fastest pace in well over two decades. Though the fourth-quarter GDP report was better than Wall Street's expectations, global investors are still jittery about the health of the world's biggest economy. Obama says that the US is in for a tough several months before a recovery takes hold. Poor corporate earnings and outlook, coupled with a slew of job cuts also kept investors on tenterhooks.
The BSE Sensex closed the day at 9,066.70, down 357 points, or 3.8% from the previous close while the NSE Nifty slid 108 points, or 3.8%, to end at 2,766.65. Both the indices closed near intra-day lows of 9,048.97 and 2,760.70, respectively. The broader market, however fared better than their frontline peers. The BSE Small-Cap and Mid-Cap indices were down about 1.5% each.
The BSE Real Estate was the worst performer, down 10.3%. DLF and Unitech, India’s two-biggest property developers, tumbled after reporting third-quarter results that missed market expectations. Among the other top losers were Metals (5.3%), Banking (5.1%), Consumer Durable (4.2%), Power (3.6%) and Oil & gas (3.1%). Capital Goods and IT were down 2.7% and 2.5%, respectively.
Within the Sensex, the top losers were Jaiprakash Associates, DLF, Reliance Infra, ICICI Bank, HDFC, Tata Steel, RCOM and Hindalco (losing between 6-14%). SBI, Wipro, Tata Motors, Sterlite, NTPC, L&T, TCS, HDFC Bank, Reliance, M&M, ONGC and Bharti Airtel were down (3.6%). Hindustan Unilever was the only stock that ended in the green, up about 0.2%.
Outside the key indexes the top losers are HDIL, Indiabulls Real Estate, Aptech, Cranes Software, Ansal Infra, Unitech, Jindal Saw, TV18, Puravankara, Axis Bank, Redington, Astra Micro, Reliance Capital, SAIL, OBC, Renuka Sugars and Titagarh Wagons.
Among the prominent gainers in the market included Spice Tele, Arshiya International, Kalyani Steel, Consolidated Construction, Carborundum Universal, Alok Industries, Geodesic, Nagarjuna Fertilizers, Mascon Global, Panacea Biotec, Indiabulls Financial, Ess Dee Aluminium, Amtek Auto, EMCO, Jagaran, Deepak Fertilizers, Simplex Infra, GE Shipping, Texmaco and Hinduja Ventures.
Asian stocks dropped for a second day, led by technology and financial companies, as losses at Hitachi and Mizuho Financial Group fueled concern that the global recession was deepening. Hitachi plunged 17% after forecasting a record loss. Mizuho, Japan’s second-largest listed bank, declined 6.6% after posting its second quarterly loss in a row.
The MSCI Asia-Pacific Index lost 1.9% to 81.53 as of 7:24 p.m. in Tokyo. About seven stocks declined for every two that advanced on the gauge, which has slumped 9.1% this year amid mounting signs corporate profits are deteriorating.
Japan’s Nikkei 225 Stock Average dropped 1.5% to 7,873.98 at the close. Hong Kong’s Hang Seng Index finished 3.1% lower. China’s Shanghai Composite Index added 1.1% following a holiday last week for the Lunar New Year. Other markets fell except Taiwan, the Philippines and Sri Lanka.
European shares too declined, with banks by far the worst performers in the first trading day of the new month. The pan-European Dow Jones Stoxx 600 index fell 2.6% to 186.35, with the banking sector down 7.6%.
Germany's DAX 30 index declined 2% to 4,254 and the French CAC-40 index lost 2.3% to 2,905. The UK's FTSE 100 index fell 1.6% to 4,083. The biggest snow storm to hit southeast England in 18 years left much of London paralyzed today.
Coming back to the Indian markets, the cash market turnover on the NSE was Rs84.46bn as against Friday's Rs98.36bn while the traded volume stood at 643.21mn shares versus 729.72mn shares.
Total turnover on the BSE was Rs30.26bn while traded quantity was 316.6mn shares.
The market breadth on the BSE was negative, with 867 shares rising as opposed to 1,577 shares declining.
Meanwhile, the FIIs were net sellers in the cash segment today at Rs1.26bn (provisional) while the local institutions also pulled out Rs1.61bn. On Friday, the foreign funds were net sellers at Rs166mn in the cash segment.