While you were sleeping: US stocks end three-day rally

Friday 18th September 2009

Stocks on Wall Street ended a three day rally overnight, with lower-than-expected revenues from FedEx Corp and Oracle leading markets lower, despite figures showing US household wealth expanded for the first time since 2007, in the September quarter.

The S&P 500 Index fell 0.31% to 1065.49 from its highest point in almost a year with three stocks falling for every one that rose, while the Nasdaq was off 0.3% to 2126.75.

"We're in rarefied air here,"managing director for institutional sales at Knight Equity Markets told Bloomberg. "We've had lots of good economic news, lots of stocks that have moved very dramatically. We need a breather here."

The Dow Jones Industrial Average rallied during the day, but closed down 0.08% on the day at 9783.92, despite gains by heavyweights including Bank of America and Caterpillar.

Stand-out performer for the day was Valero Corporation, the oil refiner tipped to bid for a stake in New Zealand's Marsden Point oil refinery, which rose 8.1% to US$21.02 on optimism caused by rising US demand for oil, to post the biggest advance in an otherwise lacklustre day for the S&P 500.

The pullback came as the Federal Reserve's Flow of Funds report showed US household net worth rising from US$51.1 trillion in the September quarter to US$53.1 trillion, reflecting the biggest quarterly jump in share prices since 1998 and the first rise in residential property values in two years.

However, economists warn that US household balance sheets are unlikely to expand quickly, despite increased economic optimism, with household net worth still well below the US$65.3 trillion peak recorded in the third quarter of 2007.

It was a different story in Europe, where banks and commodity stocks were behind the fifth straight day of gains for the FTSE 100 Index, which rose 0.78% to 5163.95, the highest level recorded since September last year. Leaders for the day were HSBC, which added 1.3%, while Barclays, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered also all posted modest gains.

Banks were also demand on other European bourses, with Spanish Banco Santander, Societe Generale, UBS and BNP Paribas all rising.

Meanwhile, crude oil prices oscillated around recent levels, with improving economic sentiment tempered by higher than average domestic stockpiles of crude oil, petrol, distillate, heating oil and diesel. Brent crude spot prices rose from US$68.46 per barrel to close at US$71.51.

Potential over-supply of copper also saw physical and futures prices slightly lower, withprices for December delivery slipping US1.65 cents, or 0.6%, to US$2.92 a pound on the New York Mercantile Exchange.

Enthusiasm for gold remains unabated, with a flood of scrap and jewellery as cash-strapped households take advantage of a 15 month rally that has taken gold above US$1000 an ounce. Gold futures settled overnight on the Comex in New York at an 18 month high of US$1,023.30.

On currency markets, the US dollar slipped to its lowest level in a year against the euro as investors sought to dump the low-yielding greenback as improving employment, manufacturing and housing data fuels hope that the US economy is recovering, and increasing global appetite for higher yielding, riskier investments.

In late New York trading, the euro rose as high as US$1.4766, its highest since late September 2008, according to Reuters data, pegging back to US$1.4736 in late trading.

Businesswire.co.nz

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