First Trading Day of 2010 Pushes Markets Higher: Financial Spread Betting Update

Posted on | January 4, 2010 |

The first trading day of 2010 has been impressive, with the Dow and S&P 500 both putting on over 1% during the first hour.

Stocks and commodities were buoyed by a barrage of robust manufacturing data today.

Official reports revealed that China’s Purchasing Managers’ Index (PMI) for the manufacturing sector rose at the fastest pace in five years. It came in at a seasonally-adjusted 56.1 in December, up from 55.7 the prior month.

In the meantime, a separate report released this afternoon showed the US ISM manufacturing index climbing to the highest level in more than three years, coming in at 55.9 from 53.6 in November.

‘An improvement in the data points will be another confirmation of the evidence that we’ve been getting stronger,’ said Edward Riley of Riley Asset Management in Boston. ‘Also, people tend to put more weight on data that comes out in the beginning of the year, so this could have an out-sized influence on trading.’ [1]

The robust data left the market feeling as if the global manufacturing industry is experiencing a synchronised rebound, which helped commodities and miners appreciate in value.

February crude oil advanced to a two-month high of $81.7 a barrel today, while gold climbed 2.4% to $1122 per troy ounce. In addition, March high-grade copper gained over 2% to $3.43 per pound.

Shares in US energy giants Chevron and Exxon jumped 2.5% to $78.9 and 1.1% to $68.96 this afternoon. Chevron’s gains may have been partially attributable to a bullish article in Barron’s. The financial newspaper said Chevron could gain 20% over the next year due to the heavy emphasis it has put on oil exploration projects.

Chesapeake Energy was another star performer, up 5.6% to $27.32 a share after Total SA agreed to pay $2.25 billion for a 25% stake in Chesapeake’s Barnett Shale gas fields.

Financials have also experienced a positive day so far, with Citigroup gaining 1.5% to $3.35 and Bank of America up 2.9% to $15.49.

Morgan Stanley, the sixth-biggest US lender by assets, surged 4.6% to $30.98 after UBS and Credit Suisse upgraded the company. UBS raised its recommendation on Morgan Stanley from ‘neutral’ to ‘buy’ while Credit Suisse upgraded the lender from ‘neutral’ to ‘outperform’.[2]

In contrast, US airlines remained in the red, as investors continued to speculate that higher oil prices, tougher security checks and colder-than-usual winter conditions would weigh on the sector’s bottom line. US Airways saw its shares sink 2.5% to $4.72, Delta Air Lines fell 3% to $11, and Southwest Airlines slid 2% to $11.20.

Elsewhere, Alcon Inc, the world’s biggest eye-care company, dropped 3% to $159.47 despite Novartis offering to buy the rest of the company from Nestlé SA and minority shareholders for around $39.3 billion.

Nestlé said it will sell its 52% stake in Alcon to Novartis for an average of $180 a share. Novartis also offered to pay 2.8 of its own shares for each remaining Alcon share held by the public.

By 3.30pm (London time) the Dow Jones Industrial Average traded 148.12 points (+1.42%) higher at 10576.17, while the broader S&P 500 climbed 15.53 points (+1.39%) to 1130.63. The Nasdaq fared relatively better, meanwhile, adding 27.65 points (+1.49%) to 1887.96.

Source: [1] Reuters News (4 January 2010), [2] Bloomberg News (4 January 2010)

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