Dow holds above 10,000 despite weaker home sales data

August 26th, 2010  by Katy Loi

Closing Data

	Current	Change	%
Dow Jones	10,060.06	19.61	0.2%
NASDAQ	2,141.54	17.78	0.8%
S P 500	1,055.33	3.46	0.3%
FTSE 100	5,109.40	-46.55	-0.9%
Nikkei 225	8,845.39	-149.75	-1.7%
ASX 200	4,320.10	-61.2	-1.4%
COMEX Gold - Dec 09	1241.3	12.8	1.0%
COMEX Silver - Sep 09	19.072	1.03	5.7%
COMEX Copper - Sep 09	321.1	-8.05	-2.4%
WTI Spot	72.52	-0.58	-0.8%
AUD-USD	0.8846	0.0005	0.1%
Aluminium	2,016.00	-22.5	-1.1%
Copper	7,067.00	-104	-1.5%
Lead	1,937.00	-54	-2.7%
Nickel	20,145.00	-565	-2.7%
Tin	20,250.00	-300	-1.5%
Zinc	1,942.00	-28.5	-1.4%

The Dow bounced up 20 points overnight after 4 straight days of losses despite a fall in new home sales in July.  Purchases fell 12 percent to an annual pace of 276,000 which is the lowest since 1963.  Concerns grew as lower borrowing costs and cheaper housing prices could not lift sales.  What could be a cause of concern is that there might be a cycle occurring where an American who has been made redundant can no longer sell their home, to move to a new job in another city.  This leaves the renter being the only ones able to gain employment by moving cities.  Home owners remain in a situation where they cannot sell their home to take a job elsewhere which makes the process of increasing employment a slower task.  Also adding to concerns was data out for orders for durable goods in the U.S.  This had increased less than expected for the month of July.  This means capital spending is slowing.

 
Gold closed higher and reached a near two-month high as energy prices remain weak.  The trend for oil remains down but a bounce of a reasonable amount is certainly overdue. Crude oil supplies rose 4.11 million barrels to 358.3 million barrels last week which is more than the expected 300,000 barrels.  This is a signal of things to come for the next six weeks, which is likely to see a continuing build in crude-oil inventories.

Our political situation remains without a resolution which may take over a week before there is more clarity, which could mean offshore investors stay on the sidelines.  Our market looks to open fairly flat this morning as we anticipate results for Fortescue Metals (FMG).  It is expected that this should be positive, as BHP delivered positive results yesterday afternoon with its iron ore business exceeding expectations.  Demand for iron ore may be temporarily affected by the excess steel supply but in the long run the fundamentals are still strong for iron ore.  BHP, with its plans to spend $17billion on new projects, is increasing its dividend to 45 cents per share from 41 cents last year.  BHP plans will not be affected by the proposed minerals resource tax even if it remains in its current state or is cancelled. It seems that companies with cash, such as RIO, OZL and BHP will be on the hunt for either acquisition or expansion – so with expiry today for August options, our focus remains on tapping in on these potential gains.
 

Data out tonight in the US is initial jobless claims and continuing jobless claims, with US GDP data to be released on Friday.

In other earnings news, Woolworth’s year net profit rose 10.1% to A$2.02 billion from A$1.84 billion a year ago. In its outlook, management said fiscal 2011 net profit should grow by 8% to 11%.  Woolworths declared a final dividend of 62 Australian cents a share.

Santos also reported a large rise in first half profit, from higher oil and gas prices and lower tax and interest expenses. Net profit for the six months to June 30 rose 94% to A$198 million from A$102 million in the previous year, which exceeded expectations.  Santos declared an interim dividend of 22 cents per share.

Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.

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