By Greg Peel
The Dow closed up 50 points, or 0.4%, while the S&P gained 0.3% to 1556 and the Nasdaq added 0.3%.
Wall Street opened slightly lower from the bell last night as traders weighed up the weekend's data out of China indicating rising inflation and slowing sales and production growth. But in the current market, stock prices do not come off for too long. The drop was short lived, and once again indices grafted their way higher over the session.
The Dow Jones Industrial Average of 30 top stocks continues into blue sky territory and is one for the headlines, but the Dow is more of a historical curiosity and Wall Street traders and fund managers concentrate more on the broad market S&P 500. It closed at 1556 last night, only 9 points shy of its 2007 all-time high, and there appears to be nothing in the way of an impediment at this stage for this index to hit blue sky.
As to what happens when it does get there, we'll have to see. There is so much talk of a pullback around that we're not likely to get one, and dip-buyers seem only to allow about a 20 point fall in the Dow before barrelling in. Only when pullback talk subsides will this market correct as it should.
Friday night's surprise jobs number provides somewhat of a conundrum. If the US economy is adding jobs, that's good. But if the unemployment rate is falling towards the Fed's 6.5% QE exit target, that's not so good. There is not sufficient confidence in the US economy to continue recovering without ongoing monetary support.
The US unemployment rate fell 0.2ppt to 7.7% in February from 7.9% in January. If this trend is maintained, Bernanke will start rolling back QE in six months. But in September the rate was 7.8%, so we've only fallen 0.1ppt in the last six months. Much depends on the participation rate. If an improving employment outlook encourages more Americans to start looking for work again, the unemployment rate can just as easily go backwards even as jobs are added.
Either way, Wall Street remains just a little nervous that too much positive information brings a QE exit that little bit closer. China is a concern, although we need to get past the New Year numbers, and Italy still doesn't have a government.
After a strong rally last week, the US dollar index slipped 0.2% last night to 82.60. The Aussie is up equivalently to US$1.0273 and gold continues to do little, rising US$2.30 to US$1581.10/oz.
Base metals were mixed on small moves last night, while the oils dipped slightly, with Brent down US39c to US$110.22/bbl and West Texas down US10c to US$91.85/bbl. Iron ore nevertheless continues to tumble, falling US$2.20 yesterday to US$141.10/t.
The SPI Overnight rose 7 points.
The local economic highlight today will be the NAB business confidence survey for February.