04 Feb 10 : Now what

Pre-Market Open Commentary for 04 February 2010

DJIA: 10270.55 -26.30
Nasdaq Composite: 2190.91 +0.85

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Following two strong sessions of rally, the US market slipped on Wednesday as a result of a weak reading on the services sector of the economy and a mixed reading on the labour market. The ISM services sector index rose weaker-than-expected to 50.5 in January, against expectations of a rise to 51, from 49.8 in the previous month. On the labour market, employers in the private sector cut fewer jobs of 22,000 jobs in January, better-than-expectations of a loss of 30,000 jobs, following a revised loss of 61,000 jobs in December but a separate reading showed that layoffs in January rose to a five-month high of 71,482 from 45,094 in December. Weaker-than-expected earnings from Pfizer as well as the strengthening of the greenback further dragged down the market.

On a more positive note, Cisco System and News Corp both reported quarterly revenue and earnings growth which surpassed expectations and the former also issued an upbeat revenue guidance that exceeded expectations. Also, Time Warner reported sales and earnings growth, the first quarterly report without AOL in a decade while AOL swung to profitability with $1.4 bil earnings from a loss of $1.9bil a year ago.

The major indices ended mixed, with the Dow Jones Industrial Average losing 0.26% and S&P 500 slipped 0.55% to close at 1,097.28. Nasdaq composite ended flat, edging up a mere 0.04%.

The market is looking for more signals that the economic recovery is taking hold. On Thursday, economic releases due include January sales from the nation’s retailers, weekly jobless claims and reading on factory orders. The corporate result of Toyota is also due on the same day.

US light crude oil for March delivery slipped US$0.25 to settle at US$76.98 a barrel.



In Singapore today:

A two-day rally on Wall Street, following upbeat corporate earnings, lured in some bargain-hunters in the Asian markets, which played catch up in a weary fashion for fear of Wall Street being put to the test on Wednesday. Nikkei rose 0.3% despite Toyota’s recall issues while Hang Seng Index surged 2.22%. The STI was pushed up by buying of big caps, including banks as well as energy and resource plays, resulting in a gain of 43.97 points to close at 2764.84. For every stock that fell, 2.92 gained. Turnover was 1.7bil shares with a value of $1.5bil traded.

Ezra scored with investors yesterday after a broker upgraded the stock to a buy with a target of $2.54. The burst of buying momentum triggered some short covering and nudge the stock 21 cents higher to $2.28. The US dollar's pullback was a boost for commodities and resources stocks. Shares of IndoAgric, Straits Asia, Noble Group, Olam and Golden Agric rose between 1 and 7 cents. New listing Sin Heng Machinery made a good debut yesterday at 33.5 cents and ended at 36 cents for a gain of 10 cents above its 26 cents offering.

Expect the local bourse to consolidate today, taking cues from the weak overnight close on Wall Street. Market is expected to exercise caution ahead of the closely watched US jobs report on Friday. News of two of China’s largest banks had to aggressively cut back on loans to satisfy the government’s directive to slow down lending is likely to further dampen sentiment.

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Market close Feb 4. Investors quick to take profit after recent gains

Investors were quic k to take profit especially since the US index futures started trading in the negative, leading to expectations of another volatile session on Wall Street later today. The benchmark Straits Times Index fell 0.7 per cent or 19.86 points to close at 2,744.98, on a turnover of 1.27 bn shares worth $1.11 bn. Losers outpaced gainers more than 2 to 1.

Among the gainers were Jardine C&C, up 42 cents to $25.72, Goodack and CWT.

Losers included property counters City Developments and CapitaLand. CapitaLand fell 11 cents at $3.76 on 28.9m shares done while City Developments shed 16 cents to $10.64.

Commodity stocks were also losers as crude oil futures fell. These included Wilmar, down 10 cents to $6.45 and Olam dropped 4 cents to $2.37.