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Wednesday, March 11, 2009
A sudden strong rally at Wall Street surprises everyone
Citigroup earns a profit in the first two months of 2009
In the US market on Tuesday, 10 March, 2009, stocks witnessed a huge one day rally. Though there was no single strong catalyst to fuel this rally, bits and pieces of news in the financial sector is believed to be the main reason for today's rally. But investors seriously doubt whether this rally is just a one day surprise. Among major news at Wall Street today, Citigroup CEO Vikram Pandit said today that the company has earned a profit in the first two months of 2009. The action has induced broad-based gains as all 10 sectors climbed substantially higher. Other than these, came a few earning guidance reaffirmations.
The Dow Jones Industrial Average ended higher 379 points at 6,926, the Nasdaq closed higher by 90 points at 1,358 and the S&P 500 closed higher by 43 points at 719.
All ten sectors ended in the green led by financials and material sectors. JP Morgan Chase, Chevron, 3M and Caterpillar were the main Dow winners.
At Wall Street on Tuesday, Citigroup CEO Vikram Pandit said today that the company has earned a profit in the first two months of 2009. This news cheered investors who got the chance to hear something good about banks after quite a long time.
Earlier in the morning, Fed Chairman Bernanke spoke about financial reforms. Stocks showed little reaction to his comments, which were largely in-line with observations to ensure that future crises will be handled adeptly.
In the telecom sector too, there was some good news. AT&T said it expects to invest around $17 billion to $18 billion in 2009, which is in-line with its 2007 capital expenditures of $17.7 billion.
Among economic report due for the day, monthly wholesale inventories fell 0.7% in January. Market expected a decline of 1.0% in January. The prior reading was revised modestly lower to reflect a 1.5% decline.
In the earnings arena, Whirlpool reaffirmed its 2009 outlook. United Technologies issued adjusted earnings estimates for fiscal 2009 that fall short of the consensus estimate. Texas Instruments narrowed its outlook, which remains in-line with the current consensus estimate. Kroger issued upside guidance for 2009. The outlook complements the company's better-than-expected fourth quarter earnings results.
Crude prices rose initially today but ultimately ended with losses on Tuesday, 10 March, 2009. Prices rose today as traders continued to mull over further announcements of output cuts by OPEC this month. But then prices fell on demand concerns. On Tuesday, crude-oil futures for light sweet crude for April delivery closed at $45.71/barrel (lower by $1.36 or 2.9%) on the New York Mercantile Exchange. Last week, crude ended higher by 1.7%. For the month of February, crude prices had ended higher by 1.5%.
EIA reported today that oil will average $42 a barrel this year and $53 next year. A month ago the EIA had said that it expected prices to average $43 and $55, respectively. Also, world oil consumption is projected to decline by 1.4 million barrels a day in 2009. That's roughly 200,000 barrels a day more than the EIA had projected a month ago.
Tomorrow the main important economic reports expected are the Treasury Budget report and the weekly inventory report on crude.
Bullion metals drop again
Strong rally at Wall Street push precious metals lower
The strong rally at Wall Street pushed bullion metals lower on Tuesday, 10 March, 2009 reducing the appeal of precious metals. Prices fell despite a weak dollar today.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.
On Tuesday, Comex Gold for April delivery fell $22.1 (2.3%) to close at $895.9 an ounce on the New York Mercantile Exchange. It fell to an intra day low of $893.5. Last week, the yellow metal remained almost unchanged. For the month of February, gold ended higher by 7.4%. For January, 2009, gold had gained 3.9%. Year to date, gold prices are higher by 1.5%.
On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (8.9%) since then.
On Tuesday, Comex silver futures for March delivery fell 40 cents (3%) to end at $12.54 an ounce. Last week, silver rose 1.7%. In February, 2009, silver had rose 4.3% after climbing 14% in January. Year to date, silver has climbed 14.5% this year. For 2008, silver had lost 24%.
In the US market on Tuesday, 10 March, 2009, stocks witnessed a huge one day rally. Though there was no single strong catalyst to fuel this rally, bits and pieces of news in the financial sector is believed to be the main reason for today's rally. But investors seriously doubt whether this rally is just a one day surprise. Other than these, came a few earning guidance reaffirmations. Stocks surged on reports that Citigroup announced that it earned a profit in the first two months of 2009.
Crude gives up earlier gains
Prices drop on demand concerns
Crude prices rose initially but ultimately ended with losses on Tuesday, 10 March, 2009. Prices rose today as traders continued to mull over further announcements of output cuts by OPEC this month. But then prices fell on demand concerns.
On Tuesday, crude-oil futures for light sweet crude for April delivery closed at $45.71/barrel (lower by $1.36 or 2.9%) on the New York Mercantile Exchange. Last week, crude ended higher by 1.7%. For the month of February, crude prices had ended higher by 1.5%.
Prices reached a high of $147 on 11 July, 2008 but have dropped almost 69% since then. Year to date, in 2009, crude prices are higher by 7.6%. On a yearly basis, crude prices are lower by 62%.
Prices rose today due to a weak dollar. Prices also rose as traders thought that OPEC will announce another production cut in March this year. But then, prices dropped as government released its oil demand figure for the year.
EIA reported today that oil will average $42 a barrel this year and $53 next year. A month ago the EIA had said that it expected prices to average $43 and $55, respectively. Also, world oil consumption is projected to decline by 1.4 million barrels a day in 2009. That's roughly 200,000 barrels a day more than the EIA had projected a month ago.
OPEC has been trying to cut production consistently in order to step up prices from their current low levels. There has been conflicting reports in the market regarding the fact that OPEC is likely to reduce output in March, 2009. OPEC has already agreed to cut cartel quotas by 4.2 million barrels a day since September, equivalent to about 5% of global oil demand. The cartel is supposed to meet on 15 March at Vienna.
Also at the Nymex on Tuesday, April reformulated gasoline fell 2.8% to $1.2972 a gallon, while April heating oil lost 1.4% to $1.1987 a gallon.
Natural gas for April delivery also lost ground, down 0.7% to $3.84 per million British thermal units.
Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.
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