The Indonesian stock market on Tuesday saw an end to the six-day winning streak in which it gained nearly 190 points or 12 percent on its way to a fresh six-month high. The Jakarta Composite Index slid below support at 1,630 points, but now analysts are suggesting that the market can climb back above that level at the opening of trade on Wednesday.
The global forecast for the Asian markets is fairly optimistic, despite some weaker than expected corporate earnings news. But the financials are expected to climb following positive comments from U.S. Treasury Secretary Timothy Geithner. The European markets were mixed and largely near the unchanged line, while the U.S. markets ended sharply higher - and the Asian markets are tipped to land somewhere in between.
The JCI finished sharply lower on Tuesday as investors locked in gains from the recent winning streak. The financial sector fell under heavy selling pressure throughout the session, while the miners and telecoms also ended in the red.
For the day, the index lost 32.99 points or 1.99 percent to close at 1,628.85. Volume was 23.5 billion shares worth 6.4 trillion rupiah. There were 92 decliners and 90 gainers, with 62 stocks finishing unchanged.
Among the decliners, Bank Mandiri slipped 3.85 percent, while Telkom lost 5.06 percent, Inco lost 3.8 percent, Aneka Tambang lost 3.45 percent, Timah fell 2.04 percent, Bank Rakyat Indonesia dropped 3.77 percent and Bumi Resources fell 2.03 percent.
Wall Street offers a broadly positive lead as stocks showed a strong upward move over the course of the trading day on Tuesday, partly offsetting the steep losses posted in the previous session. While stocks saw initial weakness on disappointing earnings news, a positive reaction to comments from Geithner drove the markets higher.
The initial weakness came after Dow component Merck (MRK) reported first quarter earnings that fell short of analyst estimates and lowered its full year revenue guidance. Caterpillar (CAT) also slashed its full-year guidance, although it reported much better than expected adjusted first quarter earnings.
In other earnings news, chemical giant DuPont (DD) reported first quarter earnings that fell year-over-year and lowered its full-year guidance. The company's downwardly revised earnings guidance brought it in line with analyst estimates.
The turnaround by the markets was partly due to comments from Geithner, who assured the Congressional Oversight Panel that there is enough money left in the government's $700 billion financial rescue program to stabilize the financial system. Geithner said there is at least $134.4 billion in funds left. The Treasury Secretary also said that the vast majority of U.S. banks have enough capital and hinted that the credit markets may be thawing following their deep freeze.
Indicators on interbank lending, corporate issuance and credit spreads generally suggest improvements in confidence in the stability of the system and some thawing in credit markets, Geithner said.
The major averages moved to the upside going into the close, ending the session at or near their best levels of the day. The Dow closed up 127.83 points or 1.6 percent at 7,969.56, the NASDAQ closed up 35.64 points or 2.2 percent at 1,643.85 and the S&P 500 closed up 17.69 points or 2.1 percent at 850.08.
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