Wall Street Index Spread Betting Report

Posted on | October 27, 2009 |

Wall Street fluctuated between gains and losses, as investors weighed up better-than-expected housing figures and earnings with disappointing manufacturing and consumer confidence data.

Stock market sentiment at the start of the US trading day was bolstered by the S&P/Case-Shiller home price indices, a gauge of home prices in 20 US cities, which rose 1% in August after gaining 1.2% in July.

The US housing data being released lately seems to suggest that prices are stabilising on the back of an improvement in demand. In my view, the real test for the US housing market will come when government’s first-time buyer tax credit expires in November, however.

Builders benefited from today’s housing data, with Lennar Corp advancing 0.5% to $13.65, and D.R. Horton climbing 0.8% to $12.03

Better-than-expected results from the likes of industry bellwethers BP and Visa also helped lift morale today.

BP’s share advanced 4.8% to $58.14 on the New York Stock Exchange after reporting a narrower-than-expected 50% drop in third-quarter profits of $4.67 billion. The company’s results encouraged investors to buy rival energy majors Exxon and Chevron, which gained 1.9% to $74.62 and $76.87 respectively.

Oil services firms also benefited, with Schlumberger up 1.1% to $64.99 and Halliburton 1% higher at $30.

Technology shares were also on the move, with Verizon, the second-largest US phone company, gaining 1.8% to $29.15 after Wells Fargo upgraded the company to ‘outperform’. [1]

International Business Machines (IBM) was also in vogue, rising 1% to $121.31, after its board approved an additional $5 billion share repurchase, bringing the company’s buyback programme up to $9.2 billion. IBM said it will repurchase shares on the open market or in private transactions from time to time, depending on market conditions.

Market morale was tainted by disappointing US manufacturing and consumer confidence data, however.

The Richmond Federal Reserve’s manufacturing index fell to a reading of seven this month from 14 in September, suggesting economic activity in the region has expanded at a substantially slower pace than the previous month.

In addition, the Conference Board’s consumer confidence index turned decidedly more pessimistic in October, dropping to 47.7 this month from a revised 53.4 in September.

The consumer expectations index, a gauge of economic activity in six months time, plunged to 65.7 in October from 73.7 the previous month, suggesting consumers are becoming less optimistic about the economy and are likely to rein in on spending.

By 3.30pm (London time) the Dow Jones Industrial Average was 59.93 points higher (+0.61%) at 9927.89, while the broader S&P 500 was 2.35 points (+0.22%) above its previous close at 1069.30.

In contrast, the Nasdaq was 10.36 points (-0.59%) lower at 1736.39, after shares in Baidu, the Chinese search engine company, slumped nearly 11.3% to $384. Investors sold Baidu after it warned that the transition to its new system to sell advertising will weigh on revenue over the first quarter of next year.

Google fell 0.5% to $551.37 and Yahoo declined 0.6% to $16.76.

Source: [1] Bloomberg News (27 October 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Comments