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Inside Markets

Switzer Daily
19 June 2009

Ahead of the release of the stress tests on the top 19 US banks the market went down, but it was not dramatic and considering the stock market there is up around 30%, the mild sell-off has to be some profit-taking.

The Dow Jones lost 102 points or 1.2% to 8,409. 
 
The Nasdaq dropped 42 points or 2.4% to 1,716. 
 
The S&P 500 gave up 12 points or1.3% to 907.

On the good economic news front, initial jobless claims fell more than expected, to their lowest level since January, which makes the jobs picture look better.

The big jobs number is out tomorrow and could be a market mover if it surprises on the bad or good side!

Also retail in April was 1.2% on the same month last year — that is a promising sign for the US consumer.

One concern was that demand for US government bonds was weak, indicating that China is not buying US official debt. That could push up interest rates and hurt the recovery.

On the stress test report, which was released after the closing bell on Wall Street, it showed 10 banks need to raise $74.6 billion in capital over the next six months.

This demand was based on what might be needed if the recession gets worse — so it’s for a worst-case scenario. How the market reacts to this information should show up on our stock market today.

If it doesn’t spook the market, there are those technical experts who think this rally still has some legs! Jordan Kotick from Barclays in the USA argues that 9 times out 9 since 1962 after a major share market sell-off like the one in March, there has been an 8% comeback month on month and this has been a cyclical low on the stock market! He thinks the market may go higher off this cyclical low.

Optimists will like to see the Oz dollar up to 75.43 US cents.

Have a great day,

Peter 


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