About Last Night
December 4th, 2008 by Lou Muddaris
Closing Data
| current | change | % | |
|---|---|---|---|
| Dow Jones | 8591.69 | 172.6 | 2.1% |
| NASDAQ | 1492.38 | 42.58 | 2.9% |
| S P 500 | 870.74 | 21.93 | 2.6% |
| FTSE 100 | 4169.96 | 47.1 | 1.1% |
| Nikkei 225 | 8004.1 | 140.41 | 1.8% |
| SPI Futures | 3560 | 4 | 0.1% |
| All Ords | 3,476.50 | 3.1 | 0.1% |
| Oil | 46.79 | -0.26 | -0.6% |
| Gold | 770.5 | -12.8 | -1.6% |
| Silver | 9.59 | -0.025 | -0.3% |
| Aluminium | 1587 | -55.5 | -3.4% |
| Copper | 3423 | -107.5 | -3.0% |
| Lead | 1003 | -57 | -5.4% |
| Nickel | 9260 | -320 | -3.3% |
| Tin | 11900 | -205 | -1.7% |
| Zinc | 1141 | -23 | -2.0% |
About last night
OK, here comes another post mortem on the U.S. economy.
1. The ADP (monitors private employers sackings) recorded over 250,000 jobs lost, the most on record (it wasn't around in 1929) which points to tomorrow's U.S. non farm payroll data being in excess of analysts' expectations of 320,000.
2. The Fed's Beige Book was weak as expected, no need for the gory details suffice to say the economy is still contracting further.
3. Ford, GM, and Chrysler have suspended payments to sacked workers and will delay medical contributions to their trade unions. These drastic measures are needed if Uncle Sam is going to bail them out.
4. Freeport McMoron said that it will cut capital expenditure from $2.3 billion to $1.1 billion, cut its dividend of $2 per share saving $775 million, and cut copper output. Furthermore they said in July copper was trading at $4 per pound and is now at $1.60 per pound and should it fall under $1.50 they have further "changes” in mind. This is great! As these large mining companies cut production the demand/supply ratio narrows which inevitably leads to higher prices for commodities.
And now the good news
1. Despite all this continuous bad news we keep rallying! Call it "built in', call it undervalued or call it 9 months forward thinking. My belief is the above plus more. Importantly both the S&P/ASX200 and the S&P500 have retraced 50% from its highs, the most watched technical indicator out there (see Fibonacci, Elliot Wave and Gann).
2. Yesterday U.S. mortgage rates fell to their lowest level in 3 years and mortgage applications soared by a record amount. This is a direct result of Uncle Sam buying Freddie and Fannie. I'm not calling this the bottom of the U.S. housing market but with the Fed announcing on Tuesday they will repurchase 10 year treasury bonds (presently an amazing 2.65%) then long term yields and mortgage rates can only go one way – down. It's all about long term rates and the yield curve.
3. Tonight the Bank of England will most likely cut rates by a minimum of 1% with the more conservative ECB cutting by 50 basis points.
QUOTE FOR THE DAY "We are what we repeatedly do Aristotle."
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