US Market continues with its joyride

Rate-cut rally continues at Wall Street in spite of crude touching $82/barrel

US Market continued with its joyful journey today, Wednesday, 19 September 2007, a day after, Federal Reserve Chairman, Ben Bernanke mesmerised US market by cutting fed fund interest rate by 50 basis points from 5.25% to 4.75%. This was the first rate cut since June 2003. The Fed had also cut its discount rate from 5.25% to 4.75%. All ten sectors once again closed higher today.

The Dow Jones industrial Average closed higher by 76.17 points at 13,815.56. The Nasdaq Composite Index, finished higher by 14.82 points at 2,666.48. S&P 500 finished higher by 9.25 points at 1,529.03.

Twenty-four out of thirty Dow stocks ended in green today. Merck was the top gainer today as shares soared by more than 2%. GM was the main laggard as the company is still continuing its discussion with United Auto Workers. Shares of GM slid more than 2%.

Financial stocks were once again in the forefront. But today’s rally was led by telecom services sector and was followed by utilities and basic materials. Energy sector also provided notable support with crude prices rising. The financial sector ignored a disappointing earnings report from Morgan Stanley.

Consumer price report offsets negative news from housing report

When market opened in the morning, all the indices were trading strongly higher. Stocks were trading with previous day’s enthusiasm. Yesterday it was Producer Price Index report and today it was Consumer Price Index report that provided good support to the market.

At the top of the hour, Labour Department reported that consumer prices unexpectedly fell in August by 0.1%. It was the first decline in the Consumer Price Index (CPI) since October of last year. The CPI had risen 0.1% in July.

The core CPI, which takes out volatile food and energy prices, rose 0.2% from July, and was up 2.1% year over year, the lowest level in more than 2½ years.

The Commerce Department reported that U.S. housing starts and permits fell to a 12-year low in August, dropping 2.6% to an annualized rate of 1.331 million, slightly under the 1.35 million forecast by the market.

Indian ADRs closed mixed today. Infy, Wipro Tech, WNS and VSNL registered loss today. Sify and Patni were the two top gainers gaining more than 4.6% each. HDFC Bank and ICICI Bank gained 2.7% and 2.2% respectively.

Crude almost touches $82

Crude oil closed above $81/barrel for the second time today in New York after an Energy Department report showed a larger-than-expected U.S. inventory decline. As per today’s weekly inventory report by the Energy Dept, crude supplies fell 3.8 million barrels during the week ended 14 September. This was more than analysts’ expectation of 2 million barrels.

Crude-oil futures for light sweet crude for October delivery closed at $81.93/barrel (higher by $0.42/barrel or 0.52%) on the New York Mercantile Exchange. The contract had climbed as high as $82.50 to set an all-time high level for a front-month contract on the exchange.

Volume hit nearly 1.7 billion shares at the New York Stock Exchange, with advancing stocks ahead of decliners 2 to 1. At the Nasdaq, more than 2.2 billion shares were exchanged, and advancing issues overtook those declining, also by a 2-to-1 count.

Tomorrow investors will again look for economic data to help set the tone of trading. Initial Claims will be out at 8:30 ET, followed by Leading Indicators at 10:00 ET. The Philadelphia Fed Index, meanwhile, will hit the wires at 12:00 ET. On the earnings front, financial companies like Bear Stearns, Goldman Sachs, and AG Edwards will report their earnings before the bell.