S&P 500 climbs for a fifth consecutive day

S&P 500 climbs for a fifth consecutive day

The S&P 500 climbed for a fifth consecutive day, its first five-day winning streak since September 16, as strong consumer confidence figures kept the bears at bay.

Among the major averages, the Dow Jones Industrial Average remained unchanged at 12291. The S&P climbed 0.1 point at 1265, while the NASDAQ rallied 0.3% to 2293.

We are at a seasonally strong patch in US markets, with the S&P on average gaining over 1% in the few days leading into the New Year, so we are seeing the traditional melt-up. The big portfolio managers have generally shut up shop, and those who are left don’t really want to sell stock, given they have probably already positioned their portfolio, and in the absence of any major news stocks tend to drift higher. Interestingly, the S&P has broken its July downtrend, while all US bourses are trading above their 50-day and 200-day moving average, and as we said in last week’s note, if we get a series of closes above these levels going into 2012 both the bears and the bulls will take notice. However, given the rise in thin volume, some will say there is less credence behind the move.

Consumer confidence figures released overnight printed an eight month high, however while the US economy is heavily driven by consumer demand (around 70%), the market took this in its stride. Granted it is positive to see a consumer who is confident and we have also seen this reflected in some of the retail data recently, however does it mean people are finding work? The price action in risk assets seems to be suggesting this isn’t the case, and is probably an indication of the feel-good factor at this time of year.

Currency markets were subdued overnight, with EUR/USD trading in a 26 point range. The Swedish krona was the star performer, helped out by tensions in the Middle East which bumped up West Texas Intermediate and Brent. All eyes now fall on tonight’s Italian auction, where they it try and get away £9 billion of 179 day bills and £2.5 million zero coupon bonds. Italian ten-year bonds opened the European session at 7.13%, however with yields closing just below the 7% mark, one questions whether the ECB was active.

All-in-all, we expect the ASX 200 to open around 4147, which would be a gain of 0.2%. SPI futures have been shut since Christmas Eve, but US futures, which re-opened at 10.00pm last night, are up 0.3% from our ASX 200 close on Friday. It is hard to really pin point an area of standout strength given the moves in commodities, although one has to say the energy space should benefit from higher prices.

With little economic data to focus on, it is worth keeping an eye on the Chinese market, which at 2166 is around the lowest levels since March 2009. Yesterday, Chinese company profits for the first eleven months of the year gained 24.4%, which is strong, however the pace of growth is down on the first ten months of the year. Along with continued European drama, Chinese growth is still going to be a major focal point for 2012.

Market

Price at 8:30am AEST

Change Since Australian Market Close

Percentage Change

AUD/USD

1.0130

-0.0039

-0.38%

ASX (cash)

4147

+7

+0.2%

US DOW (cash)

12285

64

0.52%

US S&P (cash)

1266.0

6

0.44%

UK FTSE (cash)

5538

25

0.45%

German DAX (cash)

5888

-23

-0.39%

Japan 225 (cash)

8435

51

0.61%

Rio Tinto Plc (London)

31.60

0.20

0.64%

BHP Billiton Plc (London)

18.74

0.04

0.21%

BHP Billiton Ltd. ADR (US) (AUD)

34.87

-0.28

-0.80%

US Light Crude Oil (Feb)

101.24

1.35

1.35%

Gold (spot)

1594.0

-18

-1.12%

Aluminium (London)

2016.00

-3

-0.15%

Copper (London)

7641.00

101

1.34%

Nickel (London)

18505.00

-190

-1.02%

Zinc (London)

1855.00

5

0.27%

RBA Cash Rate to be decreased by 25bp (Feb) (%)

67.00

0

0.00%

ends

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