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While you were sleeping: Momentum hard to find

Thursday 26th August 2010

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US equities rose, recovering from earlier losses, as investors found some value in beaten-down stocks.

In late trading, the Dow Jones Industrial Average rose 0.20%, the Standard & Poor's 500 Index gained 0.29% and The Nasdaq Composite Index advanced 0.63%. The S&P 500 is about 14% below from its high for the year, reached in April.

Among the most active stocks on Wall Street were Home Depot, McDonalds and Pfizer.

Orders for durable goods in the US rose less than forecast in July and sales of new homes unexpectedly dropped, highlighting the risk to the pace of the economic recovery.

Bookings for goods made to last at least three years rose 0.3%, figures from the US Commerce Department showed today in Washington. Excluding transportation equipment, demand fell by the most in more than a year.

Purchases of new dwellings fell 12% to an annual pace of 276,000, the weakest since data began in 1963, figures from the same agency showed.

Data from an industry group on Tuesday had shown an unexpectedly large drop in existing-home sales.

"New home sales was below consensus estimates, but after yesterday's [home resales] number it wasn't so much of a surprise," Paul Hickey, co-founder of research firm Bespoke Investment Group in Harrison, New York, told Reuters.

Healthcare stocks outperformed the overall market. Coventry Health Care Inc gained 4.1%  and the S&P health stocks sector added 0.6%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, fell 0.84% to 27.23 in New York. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index.

The Stoxx Europe 600 Index fell 0.8% to 247.54.

The UK’s FTSE 100 declined 0.90%, Germany’s DAX dropped 0.61% and France’s CAC 40 shed 1.17%.

Among the most active stocks in Europe were Tullow Oil, SNS Reaal Groep NV and EFG Eurobank Ergasias.

US Treasuries declined as US stocks recovered from earlier declines, reducing the need for a flight to safety.

Yields on five-year notes climbed from the lowest level since December 2008 after the government’s US$36 billion auction of the securities drew a higher yield than traders forecast.

The yield on the 10-year note rose 3 basis points, or 0.03 percentage point, to 2.53% at 2.17pm in New York, according to BGCantor Market Data.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 1.41% to 83.26.

The yen pulled back from 15-year highs against the greenback and a nine-year peak versus the euro on speculation Japanese authorities might take action to stem the currency's rise.

Japanese Finance Minister Yoshihiko Noda repeated he would respond to yen moves when necessary. His comments followed a Nikkei newspaper report that the finance ministry might consider unilateral yen-selling intervention.

The euro was supported by strong German economic data, while the US currency remained under pressure after weaker-than-expected US durable goods orders and housing data July.

In late morning trading in New York, the US dollar was up 0.3% on the day to 84.43 yen.

The euro traded 0.3% higher at 106.61 yen, recovering from a nine-year low hit on Tuesday.

Against the greenback, the euro was slightly higher on the day at US$1.2631.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, declined 0.21% to 261.92.

The price of US crude oil fell to a two-month low after a US government report showed crude inventories rose much more than expected, but later pared many of its losses.

The US Energy Information Administration report showed crude inventories rose 4.11 million barrels last week, outpacing a forecast for a build of 200,000 barrels.

Gasoline inventories were 2.27 million barrels higher, at odds with forecasts of a small drawdown. Distillate stocks increased by a higher than expected 1.76 million barrels.

"Crummy numbers, builds across the board. It's probably reflective of the economy. The broad economic data has been fairly weak in the last month to two months," Mark Kellstrom of Strategic Energy Research & Capital in Summit, New Jersey, told Reuters.

US crude for October delivery was down 7 cents on the day to US$71.56 a barrel by 1608 GMT.

October ICE Brent rose 20 cents to US$73.11 a barrel.

Spot gold was bid at US$1,237.70 an ounce at 1455 GMT, against US$1,229.25 late in New York on Tuesday. US gold futures for December delivery rose US$6.40 to US$1,239.90.

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