The Dow opened lower today as housing and consumer prices data disappointed, while commodities continue to rally.
The US Commerce department today released figures that indicated that the amount of privately owned new houses being built dramatically fell in October. The housing starts figures fell 10.6% to an annual rate of 529,000, after being 592,000 the previous month.
The figures were a long way from the 600,000 many analysts had predicted. The imminent expiration of a government tax credit for first-time buyers, rising unemployment and job insecurity were all cited as key factors in this fall.
’The labour market is a key factor. We really need to see job gains in order to become more optimistic about housing,’ said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. ‘The numbers are shocking,’ added Patrick Newport at IHS Global Insight in Lexington, Massachusetts. [1]
In a separate report from the same department, the US Consumer Price Index rose 0.3% in October, which was mildly ahead of analyst’s expectations and was down to rising prices of food, fuel and cars.
The commodity rally continues, as demand for raw materials gathers momentum. In London this morning Crude oil hit $80, copper hit a 14-month high, and gold touched a record-for-the-week $1,149.40 an ounce. This will be good news for the mining industry, of course, but governments will be worrying about the effect this will have on the consumer.
With a lack of big-ticket company reports over in the US, some investor nerves have set in, as the magnifying glasses come out.
Indicative of this increase in scrutiny, and indeed scepticism, is the share price of web-based customer relationship software leader, Salesforce.com Inc., which continued to fall in early trading, down 3.52% ($63.39) even after posting a third quarter revenue of $330.5 million yesterday. Its subsequent prediction of a more difficult fourth quarter disappointed many analysts and investors.
Cadbury has also been in the news, as it emerged that US based Hershey and Italy’s Ferrero are in discussions about a joint bid for the UK chocolate manufacturer. The talks are ‘Very preliminary. Very early in the process,’ said an unnamed source close to the two companies. [2]
Staying with the UK, Marks and Spencer shares were up 6.57% at 392.20p as news broke that the retailer had poached grocer WM Morrison’s widely regarded boss Marc Bolland to become its new chief executive. Shares in WM Morrison fell 4.81% to 281.30p.
By 3.15pm (London time), the Dow Jones Industrial Average was down 71.27 points (-0.68%) at 10366.15, while the broader S&P 500 was 5.13 points (-1.46%) lower at 1105.19. The Nasdaq was down 21.09 points (-0.96%) to 2182.69. The FTSE 100 was also down 11.13 points (-0.21) at 5334.80.
Source: [1] Bloomberg News (18 November 2009),
Source: [2] Reuters (18 November 2009)
By Anthony Grech, Research Analyst, IG Index.
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