Wall Street continue to finish higher on Wednesday. Dow Jones ended up 0.3%, Nasdaq composite gained almost 1%, and the S&P 500 was 0.4% higher. Falling oil prices and the likely approval of a House bill which will stabilize the collapsing residential properties sector cheered the market.
Under the new legislation, $300 billion will be allocated to assist troubled homeowners and the government will back mortgage giants Fannie Mae and Freddie Mac.
Oil prices declined after a government report showed more inventories than expected and a Federal Reserve report highlighted a slowing economy. September delivery fell $3.98 to settle at $124.44 a barrel, the lowest since June 4.
Amazon announced that second-quarter profits increased 102% to $158 million but Yahoo, beset with a dwindling market share and weak economy, came in with disappointing results.
Washington Mutual and Northwest Airlines suffered huge losses but did not derail market momentum. In this depressing climate, you don’t need to earn money, just show a report card better than that predicted by analysts.
On the local front, the ST Index closed at 2978298, higher by 88.32 points Wednesday. Volume almost doubled compared to the previous day.
This could be due to anticipation of solid earnings report from SGX listed companies, strong Wall Street rally on Tuesday (a recovery from a pessimistic opening), and oil’s downward trend.
Indeed, most indications point to the bear taking a break and a lot of blue-chips are worth a second look now. With cheap valuations (some at their 1 year low point) , these blue chips deserve to be picked up incrementally.
I say incrementally because you have to be cautious with the economy heading downwards or stagnating. This also looks more like a bear rally, so don’t jump in headlong.