So will this have an impact on investor confidence, or was Wall Street’s swinging day of trading overnight really a short, dead cat bounce seen in an hour to and hour and a half of late trading?
Dead cat bounces can be deceiving, trapping investors into believing the market and sentiment are stronger than they really are.
Whatever it was the trading turnaround late in the day was nothing short of stunning.
Wall Street had been heading for another nasty loss, with the tech heavy Nasdaq seeing the greatest weakness.
But that vanished, and disappeared in the last hour of dealing.
It will help our market start the day on a positive note, especially after that record setting day yesterday with the shares of the ANZ, Westpac and the Commonwealth all hitting new all time highs.
The Aussie dollar traded around 92.60 US cents – down a cent from late last week, and gold eased a touch, but oil was a bit higher.
The Dow traded in a range of 187 points and ended the day higher. It went from a triple digit rise to a modest loss and ended up 87 points.
Likewise the S&P 500 which ended up 6 points after being deeply in the red for most of the session.
But the biggest change was in the Nasdaq, which, from February 25, has led the sell off, especially in its internet and biotech sectors.
The Nasdaq was down 1.4% at one stage, but rebounded strongly in the last hour to end down by just over one point.
At one stage in afternoon trading the internet and biotech sectors (as measured by their relevant indexes) dipped into bear territory (a loss of 20% or more from their previous peak). The rebound pulled them back across the line.
But the Nasdaq is still down 4.1% for April with two trading days to go – a much steeper fall than those for the Dow or the S&P 500.
The rebound on Wall Street helped improve trading on the overnight share futures contract and our market is looking for a rise of around 20 points or so this morning.
The early weakness was a continuation of the slide seen last Friday, but for some reason the selling ran out of puff in the early afternoon and the markets stabilised, then bounced.
Shares in a host of big name tech stocks – Netflix, Amazon and Facebook for instance were down sharply during the day, but recovered to be off less than 1% in many cases.
Saving the day was a 3.9% surge in Apple as investors piled into the stock to get the share split in June.
As well in the S&P 500 AstraZeneca shares jumped 12% after Pfizer said it was still interested in a $US100 billion merger, but shares in Newmont fell 6.7% after it called off talks with Barrick that would have created a $US30 billion gold mining giant.
Shares in Charter Communications jumped 7.7% on news that Comcast and it were planning a deal to split up the assets of Time Warner Cable (TWC) in a bid to get the Comcast acquisition of TWC over the line. Shares in Comcast and Time Warner gained 1.4% and 1.1% respectively
But the Bank of America saw its shares plunge more than 6% on news that it had suspended a plan to buy back $US4 billion of shares and boost its dividend after discovering an error in the way it calculated its capital levels. Shares of Bank of America dropped 4.8% to $15.19 on Monday.
America’s second largest bank said it discovered the error and brought it to the attention of the Federal Reserve, which then required it to resubmit its capital plan. It has 30 days to do so. The error means the bank has less top tier, high quality capital than it previously reported, although it still has enough to meet regulatory requirements.
So what does the rebound mean for Australia today?
Well, the overnight trading in the share price futures contract had our market up 20 points or so today.
Our market resisted the negativity of Friday’s Wall Street sell off and rose 5 points yesterday, or 0.1%. The big four banks came to the aid of the market ahead of the ANZ’s results release on Thursday.
In fact the ANZ added 0.8% to a record high $34.94, thanks to expectations it will announce a higher profit and dividend.
Westpac shares also rose to a new all time high, up 0.2% to $35.86, while National Australia Bank shares added half a per cent to a seven-month high of $35.99. It reports next week.
And the Commonwealth Bank, which has its third quarter results next month, gadded 0.7% to an all-time high $79.45.
Investment bank Macquarie Group was also higher ahead of reporting its full year results on Friday, up 1% at $57.10.
