Pain is temporary, quitting lasts forever.
A global rally will help Indian indices post further gains today even as the outlook remains gloomy, on both macro-economic and corporate front. The market right now is in a state of flux, not knowing where to go. It is tough to take a decisive call, as the headwinds remain strong and there is no dearth of bad news. At the same time, stock valuations have come down to relatively better levels.
So, what does one do? The jury’s still out on whether global equities will hit October lows again. We think it will. Trade, if any should be done with strict stop losses. With no local triggers to play for, the market remains at the mercy of global trends and daily news- flow.
Expect a lot of stock specific action. Volatility will continue to test even the most seasoned traders. Remain calm and avoid taking undue risks, especially in stocks with dubious background and questionable fundamentals.
US stocks rallied on Tuesday, erasing morning losses, as earnings from drugmaker Merck and a rare positive report about the beleaguered housing market helped snap a three-day losing streak for the broad indexes.
The Dow Jones Industrial Average rose 141.61 points, or 1.78%, to 8,078.36, recouping some losses after three straight declines. The broad S&P 500 index added 13.07 points, or 1.58%, to 838.51. The Nasdaq Composite index advanced 21.87 points, or 1.46%, to 1516.30.
Stocks seesawed through most of the session before finding momentum in the afternoon, with commodity, technology, retail and housing stocks all rising. The financial sector was a notable decliner.
Better-than-expected results from Merck and Schering-Plough, as well as homebuilder D.R. Horton, helped counter the barrage of mixed to gloomy corporate data. A surprise rise in the pending home sales index helped, too. But any gains were limited by continued worries about the economy.
After the close, media major Walt Disney reported weaker quarterly sales and earnings that missed expectations. Shares of the Dow component fell 3% in after-hours trading.
Sales at Ford Motor, GM, Honda, Nissan and Chrysler all plunged more than expected in January, with the auto industry seeing its worst monthly sales in 26 years. Ford sales fell 40% in January, missing forecasts for a drop of 30%.
GM sales tumbled 49% in January, versus forecasts for a drop of 38%. Separately, GM said it was offering buyouts to all of its hourly workers in an attempt to cut costs and give nervous workers a way out. Chrysler made a similar announcement on Monday.
Pending home sales rose 6.3% in December, according to a report from the National Association of Realtors. Sales rose as lower home prices and mortgage rates brought out buyers. Economists had forecast steady sales after sliding by a revised 3.7% in the previous month.
Merck reported better-than-expected quarterly sales and earnings thanks to strong sales of its diabetes drugs. Fellow drugmaker Schering-Plough also reported higher quarterly earnings. Merck shares rose over 6% and Schering-Plough rose 8%.
D.R. Horton reported a smaller quarterly loss versus a year ago that was narrower than what analysts had forecast. Shares rallied 21%, joining a parade of homebuilder stocks that were surging on the pending home sales index.
UPS reported better-than-expected quarterly earnings on worse-than-expected quarterly sales. The company, seen as a proxy for the economy, said package volumes are down because of the recession and that it would be cutting costs going forward. Shares gained 6%.
Motorola reported a quarterly loss versus a year-ago profit on weaker sales. However, both earnings and sales results topped analysts' expectations. The telecom firm also warned that it will post a bigger-than-expected first-quarter loss, that it is suspending its dividend and that it is in search of a new CFO. Shares fell 11%.
Citigroup issued its first progress report on how it is spending the $45 billion it received in government funds. The bank said it has approved the use of $36.5 billion to issue mortgages, make credit-card loans and buy troubled assets. Citi shares fell 5%.
Other big financial stocks slipped too, including Bank of America, American Express and JP Morgan Chase.
Corporations announced almost 8,000 job cuts Tuesday, including PNC Financial, which reported a big fourth-quarter loss and said it was cutting 5,800 jobs. Also, Liz Claiborne said it was cutting 725 jobs. PNC shares fell 7% and Liz Claiborne shares rose 8%.
After a narrow party-line approval in the House of Representatives last week, the economic stimulus package has moved to the Senate this week. The plan that is before the Senate would increase the deficit by $885 billion over the next ten years.
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.88% from 2.72% on Monday. 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 inched higher. The 3-month Libor rate rose to 1.23% from 1.22% on Monday. The overnight Libor rate rose to 0.31% from 0.28% on Monday. Libor is a bank lending rate.
US light crude oil for March delivery rose 70 cents to settle at $40.78 a barrel on the New York Mercantile Exchange. Gasoline prices rose 1 cent to a national average of $1.89 a gallon.
The dollar fell versus the euro and yen. COMEX gold for April delivery fell $14.70 to settle at $892.50 an ounce.
Payroll processing firm ADP releases its monthly private-sector employment report on Wednesday morning before the market opens. Economists expect that 515,000 jobs were lost in January, after 693,000 were cut in December. The report is something of a harbinger of the larger government report due Friday.
Wednesday also brings the weekly oil inventories report and the ISM reading on the services sector of the economy. Kraft Foods reports earnings in the morning.
European shares advanced in a choppy session, with telecom among the best performers as investors welcomed earnings from Vodafone. The pan-European Dow Jones Stoxx 600 index rose 1.9% to 189.78.
On a national level, Germany's DAX 30 index added 2.4% to 4,374.96, the French CAC-40 index gained 1.8% to 2,982.39 and the UK's FTSE 100 index closed up 2.1% at 4,614.46.
Highly volatile session ended with modest gains on Tuesday led by index heavyweights like Grasim, ACC, Maruti and ITC. The BSE Sensex swung nearly 300 points and the Nifty index gyrated almost 80 points in intra-day trades.
Finally, the BSE benchmark Sensex rose 82 points to close at 9,149 and the Nifty rose 17 points to close at 2,783.
Among the 30-components of Sensex, 20 stocks ended in the green and only 10 stocks ended in the negative terrain. Among the major gainers in the Sensex were Grasim, ACC, Maruti, ITC, Wipro and ONGC. On the other hand, major losers were DLF, Tata Motors, Hindalco and NTPC.
Varun Shipping pared gains and ended lower by 0.5% to Rs46.2. The stock had earlier surged by over 5% after ~20mn shares of the company changed hands in a block deal.
Almost 15% equity changed hands at an average price of Rs47.75 per share on the NSE. The scrip touched an intra-day high of Rs50 and a low of Rs45 and recorded volumes of over 20mn shares on NSE.
Ashok Leyland announced that it would cut capex and would rethink investment needed for Nissan venture.
The company also added that it would spend Rs20bn against planned Rs33bn and would also reduce its intended capacity for new factory. The stock up by half a percent to Rs14 after hitting an intra-day high of Rs14.1 and a low of Rs13.9 and recorded volumes of over 2,00,000 shares on BSE.
The corporate affairs minister Prem Chand Gupta asked the registrars of companies (RoCs) to inspect the books of accounts of Educomp after media reports stated that the company’s profits were inflated and that promoters had made big profits by trading their own shares and diverting funds to unlisted subsidiaries.
The Managing Director Shantanu Prakash said that they have got no such official intimation of inquiry. However, we welcome any government probe in to the company’s accounts, added Prakash.
Educomop ended down by 12% to Rs1490 hitting an intra-day high of Rs635 and a low of Rs1450 and recorded volumes of over 7,00,000 shares on BSE.
Bilpower announced that 11,60,000 equity shares of the company have been pledged till now as securities against Bank Limit to the company and its subsidiary Company. The Pledged shares work out to 11.05% of the paid up capital of the company.The scrip surged by 3% to Rs113 after hitting an intra-day high of Rs115 and a low of Rs104.
Shares of Tata Motors declined by 6.5% to Rs133 after the company announced that its sales declined 33% in January.
Markets might further consolidate in the coming days. However, global cues would dictate the trend at least in the morning trades.