The market is having an up-day for a change — up 35 or 0.9% — but not the 201 point gain the SFE Futures suggested. Was up 137 points early on. Resources are mainly to blame — the sector is underperforming overall on the back of metals prices getting smashed overnight, along with the gold and oil price. Resources unchanged at midday, energy up 1%, property up 3.5%, and financials up 1.1%

Dow up 401. Up 432 at best. Down 380 at worst. Big turnaround mid session. Massive 500 point run-up in the last hour. Total trading range of 780. The four largest trading point ranges in the Dow’s history have occurred in the last week. The VIX volatility index reached a record 81 mid session. The S&P has fallen 10 of the past 12 trading days as the markets fix their attention on the poor earnings outlook for companies in a real economic downturn. Profits have fallen 45% on average for the 53 companies that have reported 3Q results so far.

Financials reversed mid session losses as Treasury announced it is looking at a bailout package for bond insurers. Ambac Financial up 32%. Financials up 1.7% but underperformed the market. Energy stocks were up 7.8% after massive falls the day before. Energy explorers and producers up 12.1%. Airliners flew on lower oil price — up 21%. Tech stocks outperformed — Microsoft said that a deal with Yahoo! could still make sense. Commodities down — oil down another $4.57. Gold down. Base metals fell hard. Aussie dollar up 4.3% against the US dollar. US dollar up against the Euro.

Poor economic numbers overnight. The Philadelphia Fed Reserve Bank’s Index for Regional Manufacturing dropped to an 18-year low in October — fell to negative 37.5 from a positive 3.8 points in September. September’s Industrial Production decreased a more-than-expected 2.8% – biggest drop since 1974. Homebuilder’s business outlook plummeted to all-time lows — down to 14 points. Consumer Prices were flat. Weekly jobless 4-week-moving-average numbers still elevated. September’s CPI inflation measure was flat.

  • Both BHP and RIO up 2.4% in ADR form overnight. Both down over 10% in the UK.
  • Metals all down overnight – Nickel down 9.5%, Zinc down 10.8% and Copper down 5.7%. Aluminium up 0.66%.
  • Oil price down $4.57 to $69.81 after the US government announced a big increase in inventories. The price hit a 14 month low, bringing its price to less than half its July record.
  • Gold down $34.50 to $804.50
  • US Bond down with the 10 year yield up to 3.96%.

The Australian government is indicating that the budget could drop into deficit at some point but Swan said his aim was to try and keep the budget in surplus over the economic cycle. To do this he’ll need big surpluses in boom times. Rudd wouldn’t say whether the $10.4bn stimulus package would make a near-term deficit more likely.

Main news…

  • Macquarie Airports (MAP) said Sydney Airport posted EBITDA earnings of $161m in the quarter to September — up 9.5% from $147m a year ago. EBITDA up 9.3% in the first 9-months of their reporting year. The CEO said the “solid result” was driven by “revenue growth across the business and strict cost control.”
  • Healthscope (HSP) released in-line 1Q results. Said balance sheet was strong and their funding “secure”. Said they maintained the strong growth experienced in the 2H 2008.
  • According to the AFR, Westfield Group is considering a deal that could break up US rival General Growth Properties, splitting their assets with the Simon Property Group.
  • Fortescue Metals (FMG) underperforming today after The Sydney Morning Herald said it has been forced to renegotiate iron ore freight contracts with some struggling Chinese customers following on the back of falling shipping prices.
  • ASIC says there has been no change to its position on short-selling, with the ban to be lifted at the close of trade next Tuesday.

Other news…

  • Lots of broker stuff on Ten Network (TEN) this morning after it announced results yesterday — ALL BAD — Merrill Lynch, Credit Suisse, GSJB Were and Citi all cut their target price and recommendation (except Citi — Neutral) selling the stock.
  • The National Australia Bank (NAB) has also received some attention this morning after bringing forward its result announcement by 10 days to 21 October (Tuesday) and saying it expects cash earnings to be around $3.9bn. GSJB Were maintains their BUY recommendation and they, along with JP Morgan, cut their target price.
  • GSJB Were is confident of Goodman Group (GMG) meeting 1H earnings despite another earnings downgrade from a rival US REIT. They have a 419c target price — nearly three times the current share price — and maintain their BUY recommendation. GMG has also completed raising HK$2.7bn.
  • Citi has made some changes to its media sector preferences after cutting their earnings expectations on the sector. They upped Fairfax Media (FXJ) to BUY from HOLD but cut its target price to 250c from 300c and upped Austar to HOLD from SELL. Both Austereo (AEO) — 137c target price – and APN News & Media (APN) were cut to HOLD from BUY — 288c target price.
  • The Dow Futures are suggesting a 14 point gain on Wall Street tonight.
  • Aussie dollar making up some lost group — now at 69.08c

MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.

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