By Greg Peel
The Dow closed down 58 points or 0.4% while the S&P fell 0.1% to 1693 and the Nasdaq was flat.
After another day of nothingness ? watching and waiting ? on Bridge Street, Wall Street was not quite sure what to do last night either. Shutdowns of the US government are nothing new, history tells us, but on average they only last three days. Day Two brought no sign of resolution, and talk now is of a potential two weeks of stand-off. That would take us up to the debt ceiling debate, and then it all starts again.
Democritus is wondering where he went wrong. And he thought Australia was the only joke.
The Democrats believe they have a mandate. They won "the election". But the Republicans also believe they have a mandate. They won the House. Wall Street has been frowning up to now as if a parent might when shrugging off two children arguing in the sandpit. The problem is, however, that the kids are ultimately in charge.
Ignoring the Dow, which fell last night by as much as it rallied on Tuesday night, the S&P has held its ground. But for how long? Wall Street is now fracturing into two camps: those who still regard the shutdown as an embarrassing farce that will shortly end and those warning of potentially devastating realities. Economists are already calculating how many points of GDP will be lost as each day passes. Talk is now of another recession. Ratings agency Standard & Poor's was sanguine yesterday but no one is discounting the possibility of another US credit rating downgrade. Mind you, the last time that happened Wall Street ultimately rallied. A lot.
So what will transpire? No one knows. So let's move on to the data.
The ADP private sector jobs report is a vaguely accurate predictor of the number that actually matters, being the US government's non-farm payroll report. The non-farm payroll report would have come out on Friday, except that the government has shut down. So all Wall Street has right now is the ADP, and at 166,000 new jobs the September result disappointed those expecting 180,000. The August number was also revised down to 159,000 from 176,000.
Way back in the dim dark past, jobs numbers mattered. They mattered because they are important to the timing of the Fed's ultimate exit from QE. The odd Fedhead was out and about discussing the issue of tapering last night, but no one much cared. That was yesterday's issue.
The US dollar nevertheless sold off last night, by 0.3% on its index to 79.90. It's the first time since January the index has seen numbers beginning with a seven. Fortunately the Aussie is steady at US$0.9390. Gold, on the other hand, bounced back last night, just to ensure those trading Australian goldminers suffer another case of whiplash today. It rose US$27.30 to US$1316.30/oz.
Volumes on the London Metals Exchange have been muted recently, and this week's Chinese holiday has sent a lot of traders to the sidelines as well. On Tuesday night the base metals fell by a percent or so, and last night they rebounded by a percent or so. Except tin, which continues to trade conversely. The ADP jobs number is suggesting ongoing QE, which is good for commodities.
Oil responded similarly, after falling on Tuesday. News of the pending completion of the trans-Canada Keystone pipeline was also a boost for the oils, with Brent up US$1.30 to US$109.08/bbl and West Texas up US$1.82 to US$103.86/bbl.
ECB president Mario Draghi also provided a boost for commodities in suggesting after last night's policy meeting that Europe still remained fragile. The ECB left its cash rate unchanged but Draghi reiterated that he still has plenty of firepower in the box if needed. Such good news. He may yet need to use it, he suggested, if the US dollar keeps falling like it's not meant to and the euro keeps rising.
Glenn Stevens knows how he feels.
The SPI Overnight rose 11 points.