Last week was a perplexing period for the local equities market: Trading on Monday started relatively strong but ended weak with the main index down by 25.89 points, or 0.43 percent, at 6,015.30. This was followed by a larger loss of 129.29 points, or 2.15 percent, on Tuesday, with the market settling at the session’s low of 5,886.01.
The market appeared to be in trouble, seemingly on the verge of another major breakdown that scared the wits of market participants. Foreign investors made their biggest selloff for the week.
On Wednesday, the market did not break down as feared. It made a surprising recovery, gaining 22.4 points, or 0.38 percent, on good news. But like in the previous two days, it closed lower at 5,908.41.
Certain market strategists doubted the sustainability of the recovery as this was the first time the market reacted positively to positive leads.
The market has been behaving differently. It has been observed to tank instead of float on favorable leads and positive news.
But the market climbed again on Thursday on good news. It was up by 6.18 points, or 0.10 percent, to 5,914.59 points.
Because the gain was too small despite successive advances, there was still little expectation that the market has returned to normal behavior.
Came Friday and the market made an impressive advance of 96.55 points, or 1.63 percent, and unlike previous closings, it settled next to the session’s high for the day. Also on this day, it was back at the 6,000 level at 6,011.14, seen as a staging point for recovery.
Over the weekend, I found myself asking whether the downtrend was now behind us or there was still room to run on the downside.
Following one popular argument, the market pullbacks in the last month or so have rendered the market “oversold.” This meant stock prices are at very low levels. They should cause enough trading interests to produce a market rebound.
Low prices, however, are no guarantee that the market is ripe for the picking. As seen in the past, stock prices can go down much lower than what they should be worth.
Trading directions at the moment are influenced mainly by global factors which, when you look closer, are but issues relative to individual or combined economic health of the United States, China and the eurozone.
One significant issue that affected trading results last week on Wall Street was the US nonfarm payroll for January.
As said in a market report, this “will provide more clues on the health of the world’s largest economy, and could determine how the Federal Reserve will proceed with the tapering of its monthly asset purchases.”
There were two contrasting interpretations in the nonfarm payroll report. On one end, it was said to be a disappointment. It was below the 180,000 new jobs estimate. On the other end, it was good news because the 113,000 reported figure actually consisted of 142,000 new jobs were it not for the 29,000 jobs lost in the government sector. Unemployment was 6.6 percent, lower than the forecast of 6.7 percent.
The nonfarm payrolls figure might have been higher were it not for the cold weather that caused serious operating disruptions.
The major indices of Wall Street last Friday posted their “best gains in four months” as “US investors decided that the nonfarm payrolls report wasn’t so terrible after all.”
Along with additional market commentaries that “US corporate earnings are holding just fine” and that “much of the angst in emerging markets may have been possibly priced into stock prices” earlier last week, Wall Street could really be in for a rebound.
Bottom-line spin
I agree that our local market at the moment remains heavily influenced by sentiments driving Wall Street.
I also accept the factors that have propelled the major Wall Street indices last week to some performance highs as some “compelling arguments for it to rebound.”
And while I might be wrong, I could not help feel that these arguments seemed to fade away from the thought that “the price-to-earnings ratios of the market have not yet fully come down” at the moment.
(The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at marketrider@inquirer.com.ph, densomera@msn.com or at www.kapitaltek.com.)