It’s Friday. Let’s go.
– An interesting night’s trade overnight and trade which once again proved how resilient this rally is as the Dow and S&P hit fresh all time highs. I must say, though, as much as I am 100% cash in my super account and feeling like a dope, this market feels like the mid 90s and not the late 90s which means it could still have serious legs – time will tell.
– At issue is no longer if the Fed will raise rates – and the dot chart suggests the rises will come next year – but the path of rate increases remains uncertain because US data continues to show signs of strength, just not very much. Take last night’s releases as an example: jobless claims fell to 280,000 which was lower than the 305,000 expected but balancing this out was the big fall in housing starts, -14.4% and the lower than expected Philly Fed index which printed 22.5 from 28 last.
– So at the close, the Dow was up 109 points to 17,266 for a gain of 0.64%. The Nasdaq rose 0.68% to 4,593 and the S&P rose another 9 points or 0.47% to 2011.
– European traders were also in an ebullient mood as traders in the UK voted with their buy orders on the FTSE (0.56% to 6,819) and GBP at 1.6427 from a low in the 1.60 region when the fears were the Scots would vote Yes.
– On the continent, the DAX ripped 1.41% higher to 9,798, the CAC rose 0.76% to 4,465 and stocks in Madrid rose 0.77% while those in Milan were quiet.
– It stacks up as a solid reversal overnight, with the December SPI 200 contract up 27 points to 5,430 and likely to have solid momentum this morning, although the miners will weigh again.
– In Asia yesterday, the Nikkei ripped up 1.13% back above 16,000 to 16,068. The Hang Seng fell 0.85% to 24,169 and Shanghai is up 0.35% 2,316.
– Rates markets were a little weaker in the UK with 10-year Gilts rising 6 points to 2.58%, perhaps as a hedge against a possible Yes vote, but that would be inconsistent with the rally in GBP. US 10s closed at 2.62% while German Bunds rose 3 points to 1.04%.
– On Currency markets, after a little bit of strength early in the US day, there has been a solid reversal and rethink of the Fed interest rate path and the Aussie has rallied from below 0.8950 to sit at 0.8990 this morning. USDJPY is stills strong, however, at 108.75 and euro is up a little at 1.2920.
– On Commodity markets Iron Ore sold off again with the December contract down $1.23 a tonne to $82.52 rose to recent lows and a worrying sign that this week’s rally was just noise in the overall down trend. Newcastle Coal for December rose 20 cents a tonne to $67.05 a tonne. Nymex Crude fell 1.53% to $92.98, Gold rallied a little to $1,225 after yesterday’s weakness. Silver is at $18.52 and Copper closed at $3.09. Wheat fell 2.24%, Corn dipped 0.88% and Soybeans fell 1.23%.
On the data front, German PPI and Canadian CPI might be important but everything pales in comparison to the Scottish referendum results.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Alibaba IPO and the Yahoo alternative
Yahoo, which owns 22% of Alibaba gives private traders a chance to be on the existing owners’ side of a major IPO. This was a welcome chance to change from our normal role as the ones the shares are being sold to.
Yahoo looks like pocketing about $8bn after tax from the IPO and will still own 16% of Alibaba. About half the IPO proceeds will be returned to Yahoo shareholders. But the questions now are: Will the value of the rest of Yahoo’s Alibaba investment improve or decline after the rest of the float? And: Will Yahoo invest the other $4bn proceeds wisely?
Bollinger Bands might give short term traders some help in deciding whether to sell or stay with Yahoo looking for an ongoing uptrend. Any trend peak under the upper band would be a sign of weakness compared to the high momentum rally we’ve just seen which crawled along the upper band. If there is a peak under the upper band here, it might be time to take the money. It might also pay those interested in trading Alibaba to keep an eye on the Yahoo chart as well, either for guidance on what the market thinks of Alibaba’s price or as an alternative trading stock.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC